Kamanga demands transparency in fuel procurement
By Chiwoyu Sinyangwe
Mon 10 Oct. 2011, 08:40 CAT
THE PF government needs to deal with transparency in fuel procurement as it streamlines and reviews the value chain to reduce the price of oil in the country, says energy consultant Andrew Kamanga.
On Friday, energy minister Chris Yaluma announced that government had reduced the price of petrol by 5.7 per cent to K8,155 per litre, diesel by 4.9 per cent to K7,566 and kerosene by 8.6 per cent to K5,641. Yaluma said "I also wish to inform the public that the streamlining of the fuel price is ongoing and where necessary further changes will be effected in future."
Commenting on the development, Kamanga said there was need for total review of the fuel cost chain in the country to establish a long-term and sustainable fuel pricing structure which would benefit individual Zambians and industries.
To achieve the average 6.4 per cent reduction in fuel prices, the government abolished the K65 per litre Strategic Reserve Fund.
"It is a welcome initiative but we hope that in the long-run, there will be a total solution and the total solution requires the review of all the taxes because this is just one tax that has come out," said Kamanga who is also ENFIN Solutions managing consultant. "There is still need to review the whole taxation on fuel pricing so that we see how that impacts on the final price to the consumer."
He also said the fees charged by Indeni Petroleum Refinery and Tanzania Zambia Mafuta pipeline (TAZAMA) also needed to be reviewed to see their impact in the final pump price of fuel.
Kamanga said reduction in fuel price was expected to have a positive impact on the economy.
"You need to take a holistic view to say where else can we adjust or remove the taxes so that we are able to address the final price to the consumer because at the end of the day, the same price of fuel is having an impact on other commodities like the cost of transportation," he said. "So, we expect that with the reduction in the price of diesel, we should be seeing the price of transport going down whether that will happen is something we wait to see."
Kamanga said there was need to have transparency in the manner the government was to be procuring fuel to reduce the transaction costs and ensure stability of supply.
He said it was not clear how the fuel procurement in the country was being done.
"We need to deal with the underlying fundamental issue which is the procurement of oil," Kamanga said. "We need to have transparent and long-term contracts and you reduce the element of having these continuous adjustments in price. In the past we have had Zambia National Oil Company which has been liquidated, now the procurement we are not sure how it is being structured so, again those are areas where if there are efficiencies in the way procurement is being managed, we should be able to pass on those benefits to the end user."
Kamanga said the onus was on the PF government to ensure there was transparency in the way the country bought its fuel.
"We are looking at it from outside but those who have the opportunity to look at those things in detail, I think those are the areas they should go and look at," said Kamanga. "Look at the procurement as one element, look at transportation on TAZAMA as one element. Look at the cost of refining at Indeni, and then over and above that, look at the additional taxes that are thrown in there. It is the question of streamlining the whole chain from start to finish and then ultimately review what the final impact is going to be."
Labels: ANDREW KAMANGA, FUEL, INDENI, PROCUREMENT SYSTEMS, TAZAMA
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Fuel increase threatens economic gains - Saasa
By By Gift Chanda
Sun 13 Feb. 2011, 04:01 CAT
THE fuel price hike is likely to affect the country's economic projections this year, says economic consultant Professor Oliver Saasa. And energy consultant Andrew Kamanga said the increase in fuel prices was inevitable considering the rise in oil prices on the international markets.
The Energy Regulation Board (ERB) on Friday announced an increase of almost K1,000 in the fuel pump price. A litre of petrol was adjusted from K7,639 to K8,647 while diesel was increased from K6,999 to K7,958 per litre. The price of kerosene has now been pegged at K5,641 from K5,008 per litre.
ERB attributed the increase to the rise in prices of crude oil which have surpassed US$100 per barrel on international markets and the depreciation of the kwacha. It stated that the latest cargo of crude was procured last December at US$81 million compared to the May 2010 consignment procured at US$68.6 million when the last price review was done.
In an interview, Prof Saasa said the country’s growth projections were not likely to be met this year if fuel price hikes were not stabilised quickly.
He said this also threatened to reverse the recent economic gains.
Prof Saasa said the country was likely to experience an increase in inflation while gross domestic products faces a reduction from what was being projected because costs of inputs in the production line may go up if fuel prices were not stabilised.
¨The long-term effect of this is actually transferring the effect to the consumers and also to production which will have a disturbing effect on prices,” he said.
¨Fuel is one of the inputs in production and with these increases, one hopes that the effect is not too significant to seriously affect the economic fundamentals because if it does, it may affect our growth projections.”
He said despite ERB increasing fuel by a minimal K866, transport costs were likely to go up.
¨You find that the increases in transportation costs are not proportionate to the actual increase of the cost of fuel so the consumer bears the brute. So one hopes that they will be some level of restraint on those in the transportation sector,” said Prof Saasa.
But Kamanga said the increase was unavoidable.
¨The question is that will we be able to absorb it in the economy without affecting the key parameters such as the projected inflation and economic growth? If we are able to manage or cushion the impact then that will be good,¨ he said. ¨But in a practical scenario any increase in fuel especially diesel, which is used in production, is that almost automatically we start seeing the prices of commodities going up, transport is one of them.¨
Kamanga said the transportation costs would threaten maize prices.
¨We are going closer to the end of the rainy season into harvest period. We hope that this will not lead to an increase in price of maize, which obviously the farmers will be happy with,¨ he said.
He said in the short term, the fuel price increase may have an impact on the economic growth the country achieved last year.
¨We are just in February and our budget cycle starts in January so the impact may not be that much. But we have to see how sustainable these prices are going to hold. If they are going to hold for the next one quarter, then we can safely say the negative impact will be manageable, if it exceeds that then definitely inflation is going to go up," said Kamanga.
Labels: ANDREW KAMANGA, ECONOMY, ERB, FUEL, OLIVER SAASA
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Expert urges transparency in crude oil procurement
By Florence Bupe
Tue 22 Dec. 2009, 04:00 CAT
GOVERNMENT needs to come up with a more transparent crude oil procurement system in 2010 to avert any possible fuel shortages, energy expert Andrew Kamanga has cautioned.
Kamanga, in an interview, said there was need to expand the role of the private sector in crude oil procurement as opposed to the current system where the procurement exercise was a preserve of government.
“There is need to expand the role of private sector participation in the importation and financing of crude oil as this continues to be the preserve of government,” Kamanga said.
He said the fears that fuel prices would go up if the oil sector was left to oil marketing companies were unfounded as the country had a regulatory framework in place that would address such issues.
“...we already have the regulator who would still be able to provide regulatory oversight in a competitive market,” he said.
Kamanga said the fuel crises that hit the country for almost two months in the last quarter of 2009 should not be allowed to recur, saying necessary measures such as infrastructure development and financing amendments should be effected.
Following the collapse of a key component at the country’s sole Petroleum Refinery, the country was rocked by acute shortage of petrol and diesel which threatened to halt the economic wheels of the country.
Although the problem was caused by a breakdown of the catalyst at Indeni Petroleum Refinery, most stakeholders contented that there was lack of appropriate and timely policy intervention to quickly normalise petroleum supply.
Kamanga said the petroleum sub-sector had faced challenges which could have been averted if the right measures were put in place.
“On the petroleum side, we need to quickly deal with the three key issues namely pricing, procurement and financing, and infrastructure availability at TAZAMA (Tanzania Zambia Mafuta pipeline) and Indeni at any given time,” Kamanga said. “We are at a critical stage where we have to decide as a country whether Indeni should continue or be totally scrapped off in view of the high costs of its operations.”
Kamanga observed that the country still had vast opportunities for the development of the petroleum sub-sector, noting that the private sector had a pivotal role to play in this development.
He said despite the challenges that faced the sub-sector in the 2009 financial year, there had been an increase in the number of fuel service stations, signalling that there were still gaps that needed to be filled.
“The positives are seen with the increase in filling stations which have come onto the market. This only confirms that there are still opportunities for more players in the retail market,” he said.
Kamanga also called on government to step up its efforts in the expansion of fuel storage facilities and allow for full competition in the petroleum market.
He said this could only be achieved with adequate political will as it was a policy matter.
“At policy level, government needs to expand fuel storage facilities and allow full competition in the market. Government needs to play the role of policy formulation and move away from the procurement and financing of fuel,” he said.
Kamanga also advised government to seriously consider moving away from engaging a single supplier of crude oil to a dual supplying source.
And commenting on the performance of the electricity sub-sector, Kamanga said the year had proved very challenging as Zesco lost vital equipment to accidents.
“Zesco experienced the loss of a big 135MVA transformer at Leopards Hill sub-station which resulted in load shedding in Lusaka and surrounding areas fed from the same substation. Furthermore, there was a fatal accident at Kariba North Bank hydropower extension project,” he recounted.
Kamanga also cited the management instability at Zesco as a drawback to the development of the electricity sub-sector, saying it was unacceptable for such a strategic institution to continue operating without an incumbent managing director.
“On the operational side, we saw the departure of Rhodnie Sisala who was relieved of his duties after seven years. He was promptly replaced by Dr Lemba Nyirenda who only lasted less than two months on the job. Mr Cyprian Chitundu has been acting as managing director since then, a situation which is totally unacceptable,” he said.
Overall, Kamanga charged that the challenges that were faced in the energy industry were as a result of lack of p roper planning on the part of government.
“It should be noted that these factors have always been known by government, but surprisingly we continue going through processes all the time,” said Kamanga.
Labels: ANDREW KAMANGA, OIL, PROCUREMENT SYSTEMS
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Expert advises govt over revenue from fuel taxes
By Joan Chirwa and Fridah Zinyama
Friday June 13, 2008 [04:00]
GOVERNMENT can still accumulate a reasonable amount of revenue from fuel taxes on account of increasing consumption levels instead of removing subsidies, energy expert Andrew Kamanga has said. But energy permanent secretary Peter Mumba said the government's decision to remove fuel subsidies still holds, only hinting that the ministry would propose a review of the current tax structure for fuel to make it more responsive to consumer needs.
Reacting to the government's decision to phase out fuel subsidies by the end of this month, Kamanga said the current fuel taxes were quite high to guarantee a reasonable revenue collection by government.
"At the beginning of the current budget year, government made pronouncements to collect a fixed amount from fuel levy," Kamanga said. "But if they government are now going to let prices go up, which the ERB will be doing in view of the removal of a subsidy on fuel, then government will collect even more from consumers in form of fuel levies."
Kamanga said Zambia's consumption levels for fuel had been increasing owing to massive investments placed in key economic sectors such as mining, hence raising revenue collected by the government.
"Government should therefore consider reducing taxes on fuel so that its decision to stop subsidising fuel does not have any effect on the economy," said Kamanga.
According to data compiled by Energy Regulation Board (ERB), diesel consumption in August last year was recorded at 44.3 million litres, from about 30.9 million litres consumed in January the same year.
A total of 14.1 million litres of petrol were consumed in August last year, with a very minimal increase from the January figure.
And on every litre of fuel, an average of 55 per cent of the cost goes towards taxes. For example, on every litre of petrol, a consumer contributes 16 per cent as value added tax (VAT), excise duty at 45 per cent, road levy at 15 per cent and import duty charged at five per cent. For diesel, the only difference is the excise duty, which is charged at 15 per cent, explaining the slightly lower pump price of the commodity at service stations.
And Mumba said the government would not change its position to stop subsidising fuel as it had become unsustainable.
Mumba however said the government would look at best ways of approaching the issue, such as revising the tax structure for fuel.
"It is not a secret that once the subsidies are completely removed, the pump price for fuel will go up," Mumba said. "I think we also need to look at the current tax structure for fuel."
Mumba further said the government was considering holding discussions with Independent Petroleum Group of Kuwait - the appointed supplier of crude oil - to establish ways of mitigating increasing prices of oil on the international market as the current pricing arrangement with the contractor was not fixed.
Mumba said the government has submitted its recommendations to Zambia National Tender Board (ZNTB) on the bank, which is supposed to finance the crude oil from IPG.
He said four institutions had expressed interest in bidding for the financing of crude oil and that ZNTB would announce the preferred bank by next week.
"The four institutions which bid to finance the crude oil are Zanaco, Citibank, PTA and Finance bank," he said. "We are hopeful that the financial institution chosen will not take time to finish negotiations."
Mumba hoped that the bank that would clinch the deal would hasten the negotiation process unlike the other negotiations that had collapsed.
And during the launch of the energy conservation week under the theme 'Energy Efficiency- Achieving sustainability together' which will be commemorated from June 12 to 14, Mumba said it was important for citizens to efficiently use electricity so that the country does not suffer from any further shortages which could affect the economy negatively.
Labels: ANDREW KAMANGA, PETER MUMBA, TAXATION
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