Bulk oil imports system runs into serious trouble

[Kibanga Ampiga Mkoloni]

HIVI TAKUKURU WANAKZI GANI ? au mpaka watu waseme ?

TISS je? si walitakiwa walijue hili mapema ?

Bulk oil imports system runs into serious trouble

Written by ANIL KIJA

Friday, 31 August 2012 07:30

THE recently-introduced system of importing oil in bulk in order to reduce downstream costs has already run into problems that should have been foreseen, observers say.The reason for the rising skepticism about how the new 'bulk oil procurement' method would combine price efficiency with quality oil is that those in charge of the processes don't seem to have found an answer to the problems of quality. Fuel retailers are already saying that much of the imported oil is bad – and the controllers vacillating about that! A fortnight or so ago, the Tanzania Bureau of Standards (TBS) issued a statement denying that some substandard oil was imported under the new system. However, other authorities in the same field seemed to hold a different stance! A statement released on Tuesday by the Petroleum Importation Coordinator (PIC) said that, in an effort to control fuel adulteration, a three-months ban had been imposed on importers of substandard oil under the bulk procurement system. The statement also noted that PIC shall embark on inspection of fuel from neighbouring countries... but on the basis of experience, if internal controls prove to be intense enough, the latter method could be used by auxiliary 'bulk importers,' as regularity of inspection of oil from across borders would be substantially less intense. Briefing the media on the move, PIC Board Chairman Sharif Mansoor said TBS was conducting six tests out of the 17 tests required for adequate quality control. As it happens, Sharif Mansoor is also a director for Addax Energy SA, whose Switzerland-based parent company is the winner under the new system of a tender to import 232,000 tonnes of petroleum products for October 2012! The Board chairman said that “PIC shall not allow the importation of oil mixed with ethanol... "To ensure importation of quality products, PIC will from now test “the products) in other countries," he stated. If nothing else, this illustrates an experimental way of doing things which analysts say shows that the bulk importation system is based on trial and error! This functional asymmetry apart, there is a slight problem in the PIC, what with the Board chairman also being the director of a bidding company... This brings matters back to the crucial issue of 'conflict of interests!' The fact that the PIC is chiefly based in the private sector – and that bulk oil importation was ostensibly designed to control the private sector – shows policy failure... In effect, PIC is sort of private sector self-regulation, assisted by a flawed oil quality checking method as the TBS – going on the basis of the PIC Board chairman's remarks! Structurally, if PIC controls bulk oil importations, and it is itself situated in the private sector (or works chiefly on that basis), it would then follow that some other public agency should be overseeing its operations and the quality of its own work. This is not only in the testing of oil products, but also in its reporting mechanisms, so as to ensure that nothing goes wrong – or is conducted by discretion due, for instance, to a conflict of interests! Agencies that are well-placed to do so of course include TBS – if it had not been tasked initially with the testing itself – and the Energy & Water Utilities Regulatory Authority (EWURA). This latter seemed to be the logical authority in that regard, but may have been hived out of that function to create organisational space for other agencies to be created – ostensibly to reduce bureaucracy, and long waiting periods at the ports, etc. While TBS has insisted that some of the oil which imported under the bulk procurement system was adulterated, EWURA officials witnessing the tender opening refused to comment on the recent changes announced by PIC! If nothing else, this implies that there are elements of dissent or disagreement with the method(s) used and the results thereof – but preferred not to make the matter public! At the same time, there is a 'public relations' aspect to the issue... Or, rather: revenue collection overriding consideration. This could, in a way, explain some of the problems of interest and checking that are surfacing regarding how bulk oil importation is being managed and/or reformulated from time to time. PIC Chairman Mansoor, who is also the member of Parliament for the Kwimba Constituency, said much success has been recorded since the bulk procurement method was adopted. For one, the Tanzania Revenue Authority (TRA) was now in a position to make realistic tax collection projections – which is, on the face of things, a good thing. However, analysts were wondering what else has been achieved – apart from simplifying tax collections – as quality control seems to run into institutional contentions, with TBS saying there is no problem, and PIC insisting that there are problems! Such an assessment could well be right, especially if it came from independent sources. But, when it is reached by, say, a local representative of a potential supplier abroad, it becomes harder to shield decision from criticism – even when TRA and others attest that it is working much better for them! Equally intriguing is the change of the bulk oil importation format from three months to one month supplies. According to the PIC chairman, this change has been made to enable local companies participate in the tendering processes... Will this change not compromise the earlier rationale to the general effect that truly bulk procurements would reduce costs downstream? Earlier, the minimum importation level under the bulk procurement method was 600,000 tonnes. This has now been cut down to a third on a monthly basis – thus implying a tripling of the paperwork, and the attendant lobbying as to who obtains the tender the following month! In addition, if there is indeed a need for local firms to be given space to bid, analysts ask: why shouldn't the major local oil dealers import in bulk on their own, instead of being given runs to import the same fuel quantities? The same analysts affirm that this is the second-stage failure of the bulk importation system in relation to its original intentions... One was that it would place oil procurement under the public sector, with the chief interested party being the Tanzania Petroleum Development Corporation (TPDC)! This modality did not succeed for reasons that have never been explained - but could be gleaned from what PIC Chairman Mansoor had to say... That, with TPDC in charge and doing the bulk importation of fuel itself, TRA would probably have found it difficult to collect the right amount of taxes... In other words, the original intention of bulk importation was to bring it under the public sector, where ordinary impressions also affirm that it would also limit the pricing of the commodity as dishonest dealers mark up prices when they import on their own. With that intention thrown out of the window on the basis of its foreseeable revenue complications, retaining the idea on the basis of price usefulness of bulk importation as such is running into problems, first: of quality control when a company imports oil for other users and not for its own sale, as then it can collude with any third party for cash vs quality trade-offs. The second problem – which now threatens to make the whole arrangement a mess – is shifting from major importers tendering not just on their own financial clout and track record, but on the perception that they will seek to protect their outward image, the brand image as it were. Seeking to make local companies bid for the tenders would make this whole expectation self-defeating, as it turns bulk importation tenders into a windfall opportunity that any major oil company may wish to seek! So, chances of proper control of quality on existing institutional premises are limited at best... Especially if, for instance, success in that process chiefly depends on PIC shouting down TBS all the time, as EWURA and TPDC watch from the sidelines!

 

[Kamundu]

System zote mbili zilikuwa mbovu kwasababu watu wote wahusika ni walarushwa wakubwa. System ya zamani ilikuwa inaingiza mafuta kimagendo na ndiyo maana mafuta na kodi za kutoka kwenye imports zimeongezeka sana kwani kiasi kikubwa kilikuwa kinaingizwa kimagendo. Sasa wametoa tender kwa kampuni moja hivyo kama wakipata mafuta mabaya au hata wakadanganya bei hakuna ushindani. Hivyo walalamishi wa hii system vilevile ni wakuangalia kwani system ya zamani ilikuwa na matatizo yake. Solution ni simple serikali isijihusishe kwenye biashara za mafuta period. Pili mtu yeyote mwenye uwezo wa kuleta mafuta yenye kiwango aruhusiwe hii itapunguza bei na kuongeza ufanisi. Tanzania kila siku wanatafuta system za kufanya watu wale rushwa badala ya kutafuta system za kusaidia maedeleo ya nchi na nchi ikiwa masikini kila mmoja ana loose kwa namna moja au nyingine.

HIVI TAKUKURU WANAKZI GANI ? au mpaka watu waseme ?

TISS je? si walitakiwa walijue hili mapema ?

Bulk oil imports system runs into serious trouble

Written by ANIL KIJA

Friday, 31 August 2012 07:30

THE recently-introduced system of importing oil in bulk in order to reduce downstream costs has already run into problems that should have been foreseen, observers say.The reason for the rising skepticism about how the new 'bulk oil procurement' method would combine price efficiency with quality oil is that those in charge of the processes don't seem to have found an answer to the problems of quality. Fuel retailers are already saying that much of the imported oil is bad – and the controllers vacillating about that! A fortnight or so ago, the Tanzania Bureau of Standards (TBS) issued a statement denying that some substandard oil was imported under the new system. However, other authorities in the same field seemed to hold a different stance! A statement released on Tuesday by the Petroleum Importation Coordinator (PIC) said that, in an effort to control fuel adulteration, a three-months ban had been imposed on importers of substandard oil under the bulk procurement system. The statement also noted that PIC shall embark on inspection of fuel from neighbouring countries... but on the basis of experience, if internal controls prove to be intense enough, the latter method could be used by auxiliary 'bulk importers,' as regularity of inspection of oil from across borders would be substantially less intense. Briefing the media on the move, PIC Board Chairman Sharif Mansoor said TBS was conducting six tests out of the 17 tests required for adequate quality control. As it happens, Sharif Mansoor is also a director for Addax Energy SA, whose Switzerland-based parent company is the winner under the new system of a tender to import 232,000 tonnes of petroleum products for October 2012! The Board chairman said that “PIC shall not allow the importation of oil mixed with ethanol... "To ensure importation of quality products, PIC will from now test “the products) in other countries," he stated. If nothing else, this illustrates an experimental way of doing things which analysts say shows that the bulk importation system is based on trial and error! This functional asymmetry apart, there is a slight problem in the PIC, what with the Board chairman also being the director of a bidding company... This brings matters back to the crucial issue of 'conflict of interests!' The fact that the PIC is chiefly based in the private sector – and that bulk oil importation was ostensibly designed to control the private sector – shows policy failure... In effect, PIC is sort of private sector self-regulation, assisted by a flawed oil quality checking method as the TBS – going on the basis of the PIC Board chairman's remarks! Structurally, if PIC controls bulk oil importations, and it is itself situated in the private sector (or works chiefly on that basis), it would then follow that some other public agency should be overseeing its operations and the quality of its own work. This is not only in the testing of oil products, but also in its reporting mechanisms, so as to ensure that nothing goes wrong – or is conducted by discretion due, for instance, to a conflict of interests! Agencies that are well-placed to do so of course include TBS – if it had not been tasked initially with the testing itself – and the Energy & Water Utilities Regulatory Authority (EWURA). This latter seemed to be the logical authority in that regard, but may have been hived out of that function to create organisational space for other agencies to be created – ostensibly to reduce bureaucracy, and long waiting periods at the ports, etc. While TBS has insisted that some of the oil which imported under the bulk procurement system was adulterated, EWURA officials witnessing the tender opening refused to comment on the recent changes announced by PIC! If nothing else, this implies that there are elements of dissent or disagreement with the method(s) used and the results thereof – but preferred not to make the matter public! At the same time, there is a 'public relations' aspect to the issue... Or, rather: revenue collection overriding consideration. This could, in a way, explain some of the problems of interest and checking that are surfacing regarding how bulk oil importation is being managed and/or reformulated from time to time. PIC Chairman Mansoor, who is also the member of Parliament for the Kwimba Constituency, said much success has been recorded since the bulk procurement method was adopted. For one, the Tanzania Revenue Authority (TRA) was now in a position to make realistic tax collection projections – which is, on the face of things, a good thing. However, analysts were wondering what else has been achieved – apart from simplifying tax collections – as quality control seems to run into institutional contentions, with TBS saying there is no problem, and PIC insisting that there are problems! Such an assessment could well be right, especially if it came from independent sources. But, when it is reached by, say, a local representative of a potential supplier abroad, it becomes harder to shield decision from criticism – even when TRA and others attest that it is working much better for them! Equally intriguing is the change of the bulk oil importation format from three months to one month supplies. According to the PIC chairman, this change has been made to enable local companies participate in the tendering processes... Will this change not compromise the earlier rationale to the general effect that truly bulk procurements would reduce costs downstream? Earlier, the minimum importation level under the bulk procurement method was 600,000 tonnes. This has now been cut down to a third on a monthly basis – thus implying a tripling of the paperwork, and the attendant lobbying as to who obtains the tender the following month! In addition, if there is indeed a need for local firms to be given space to bid, analysts ask: why shouldn't the major local oil dealers import in bulk on their own, instead of being given runs to import the same fuel quantities? The same analysts affirm that this is the second-stage failure of the bulk importation system in relation to its original intentions... One was that it would place oil procurement under the public sector, with the chief interested party being the Tanzania Petroleum Development Corporation (TPDC)! This modality did not succeed for reasons that have never been explained - but could be gleaned from what PIC Chairman Mansoor had to say... That, with TPDC in charge and doing the bulk importation of fuel itself, TRA would probably have found it difficult to collect the right amount of taxes... In other words, the original intention of bulk importation was to bring it under the public sector, where ordinary impressions also affirm that it would also limit the pricing of the commodity as dishonest dealers mark up prices when they import on their own. With that intention thrown out of the window on the basis of its foreseeable revenue complications, retaining the idea on the basis of price usefulness of bulk importation as such is running into problems, first: of quality control when a company imports oil for other users and not for its own sale, as then it can collude with any third party for cash vs quality trade-offs. The second problem – which now threatens to make the whole arrangement a mess – is shifting from major importers tendering not just on their own financial clout and track record, but on the perception that they will seek to protect their outward image, the brand image as it were. Seeking to make local companies bid for the tenders would make this whole expectation self-defeating, as it turns bulk importation tenders into a windfall opportunity that any major oil company may wish to seek! So, chances of proper control of quality on existing institutional premises are limited at best... Especially if, for instance, success in that process chiefly depends on PIC shouting down TBS all the time, as EWURA and TPDC watch from the sidelines!