Maravi

‘Govt shouldn’t blame ERB for fuel shortage’

‘Govt shouldn’t blame ERB for fuel shortage’
By Kabanda Chulu
Wed 04 Nov. 2009, 04:01 CAT

GOVERNMENT should not blame the Energy Regulation Board (ERB) for the countrywide fuel shortage because energy permanent secretary Peter Mumba had written to oil marketing companies (OMCs) assuring of a price increment when finished petroleum products are imported, The Post has been informed.

And sources at Ministry of Energy have dismissed chief government spokesperson Lieutenant General Ronnie Shikapwasha's assurances that fuel supply will normalise soon, saying the fuel stocks were too little to meet Zambia's daily consumption of about 700,000 litres for petrol and over 900,000 litres for diesel.

Despite Lt Gen Shikapwasha's assurances, several service stations in Lusaka do not have sufficient fuel and petrol attendants revealed that they were selling whatever stocks they received.

According to a letter dated October 19, 2009 and addressed to OMCs, Mumba stated that his ministry and that of finance and the ERB were working together on the figures for the duty waivers based on the agreed quantities of 11 million litres for petrol, 21 million litres of diesel and one million litres of kerosene that would be imported by the 17 OMCs registered in the country.

“As you will recall, it was agreed during our meeting at State House on 14th October 2009 that OMCs should also be allowed to import finished petroleum products during the period of the Indeni Refinery shutdown in order to supplement government imports, as agreed this letter serves to inform you that government will provide duty waivers to the OMCs on the imported diesel and unleaded petrol,” stated Mumba.

“As agreed at State House by yourselves that the reduction of duties only will still not make the importation of petrol economical, government is therefore working on a slight upward adjustment in the price of petrol and you will be advised in due course of details of the price increase.”

On Thursday, October 29, 2009, ERB acting executive director Lukonde Mfula announced that prices of petroleum products had been revised upwards with diesel increasing from K5,478 to K6,026 per litre while petrol prices had been pegged at K5,818 from K6,932 per litre.

Mfula stated that the current price review was necessitated by the importation of refined petroleum products during the on-going shutdown of Indeni Refinery as well as changes in international oil prices and also the inclusion of a K65.00 per litre cost line that has been introduced to finance cost of holding 15 days statutory operating stocks by all OMCs.

But ERB board chairman Sikota Wina immediately withdrew Mfula's statement and said there were more pressing matters concerning fuel supply stability in the country and fuel pricing was not one of them.

However, the sources said the ERB made a decision looking at Mumba's assurance to the OMCs and what would be the landed cost of the imported petroleum products.
The sources stated that the decision to import fuel products does not rest with government but with OMCs since it is purely a business decision.

“Government wants the situation to look as though ERB ignored or did not consult the board but this was not the case since the action taken by management at ERB was within its mandate. As a result of politics, Wina was forced to overrule management to show that there is no coordination and yet it was agreed by all stakeholders that importation of petrol will only make sense with price increment,” the sources said. “OMCs can import fuel products any time they want but since the price is regulated by government through ERB, then OMCs have to request for waivers or upward adjustment of prices in order to make some profit.”

Last Friday, finance minister Dr Situmbeko Musokotwane issued statutory instrument (SI) number 89 of 2009 to waive 25 per cent duty on importation of petroleum products but industry experts have argued that only diesel will be profitable for OMCs to import since its excise duty stands at seven per cent while that of petrol is pegged at 36 per cent hence there might be reluctance in importing the commodity.

The sources further stated that assurances by Lt Gen Shikapwasha were not true since national daily consumption outstrips what TAZAMA was holding in reserves.

Lt Gen Shikapwasha on Monday stated that TAZAMA had 1,705,000 litres of petrol against a daily consumption of 700,000 litres while for diesel, TAZAMA was holding 896, 000 litres which is far short of the over 900,000 litres national daily consumption.

On August 28, 2009, Dr Musokotwane issued SI number 55 of 2009 to allow the ministry of energy to import diesel duty free but since the ministry does not have capacity, it contracted, without tender procedures, Dalbit Petroleum of Kenya and IPG of Kuwait to import the commodity.

Labels: ERB, FUEL, OMCs, PETER MUMBA

posted by MrK @ 5:05 AM