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Is Ewura losing the battle?

Discussion in 'Habari na Hoja mchanganyiko' started by BAK, Nov 9, 2008.

  1. BAK

    BAK JF-Expert Member

    Nov 9, 2008
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    Is Ewura losing the battle?

    2008-11-09 13:47:27
    By Imani Lwinga

    As fuel prices hedged slightly but stayed generally high throughout the country for the fourth straight week since the global fuel price dropped sharply, the Energy and Water Utility Regulatory Authority (Ewura) has backed down from its deadline for oil dealers to decrease prices or face intervention from the authority.

    The authority`s flip-flopping is seen by some as an indication that it lacks either the will or the clout to regulate the oil industry, which has kept prices fairly static even though world prices fell further from a record high of $147 a barrel in July to just above $62 a barrel this week.

    Though Ewura had previously vowed not to interfere with free market rules, last week it sent a letter to oil dealers warning that if prices did not drop within the week that the authority would intervene.

    As that week came and went with little change seen at the pumps, Ewura has since pushed the problem into the laps of consumers, who it says have the power to push prices down by only purchasing the lowest-priced fuel, and it has said that the letter it sent was not an order or ultimatum in the first place.

    ``It was not an order. It was just a warning on which Ewura expressed its concern and it had nothing to do with things like taking prompt measures after a week of that warning,`` Ewura spokesperson Titus Kaguo said.

    But the letter, dated October 27 and signed by Ewura Director General Haruna Masebu, expresses the authority`s concern with the discrepancy between prevailing retail prices and the global barrel price, and says ``�if this mismatch continues for another week, Ewura will be forced to start setting prices in earnest.``

    The letter also refers to a September 24 meeting held to discuss the same issue, but does not give any other details on that meeting.

    Despite the cut and dry tone of the letter, Masebu softened Ewura`s stance when he spoke to journalists in Dar es Salaam this week, backing off its threat to oil dealers and instead turning to consumers to use their purchasing power to sway the market.

    ``Avoid fuel price-hikers to force them to cut prices,`` he said, noting that some dealers have already started cutting prices since the regulator`s computed indicative petroleum prices were released early this month.

    This abrupt change of subject seemed an implicit reversion to Ewura�s policy of not interfering with the free market.

    ``It should be noted that because the downstream petroleum sector is liberalised, EWURA does not set prices for petroleum products,`` the utility regulator has been quoted in its regular public notices through its official website as well as periodical adverts in various newspapers.

    But while Ewura has backed off its threat to regulate prices, some oil dealers say the high fuel prices are still the government`s responsibility, because they say high taxes have buoyed pump prices.

    Government taxes and other charges for each litre of petrol is 545.10/-, while a litre of diesel is taxed 520.80/-. Based on Ewura�s projected price of 1,444.03/- for a litre of petrol in Dar es Salaam, a dealer would be left with 898.93/- from which he must detract other expenses like transport before netting a profit.

    ``It`s the government that makes fuel expensive, not dealers. If, with all the efforts to import the consignment plus costs and hassles, the government simply takes that much, then who is pushing up prices?`` asked an official from a company controlling a significant number of petrol stations across the country.

    Though Ewura encourages motorists to seek out the best deal on fuel, some drivers are wary of refueling at petrol stations offering low prices for fear the fuel they sell has been adulterated.

    ``If you have a car and fuel in a petrol station with lower price you may be damaging your car. I have experienced this � it is not pure petrol,`` a taxi driver told The Guardian on Sunday in Tabata, a suburb of Dar es Salaam.

    Ewura Commercial Manager for Petroleum Godwin Samwel said Ewura, in collaboration with the Weight and Measures Agency and Tanzania Bureau of Standards (TBS), is routinely inspecting all pump stations to ensure quality and standards and to deter mixing or diluting fuel.

    ``That was actually the case in the past. But we have increased our surveillance together with our partners,`` Samwel said.

    Samwel told The Guardian on Sunday that Ewura still reserves the power to intervene in the market, but has decided to hold off on that for the moment.

    ``We are compelled to modify [the petroleum market] when it�s appropriate to do so in areas such as economic regulations, supply chain, procurement methods and when prices are not good,`` Samwel said.

    ``We are giving the companies more time to lower pump prices�if they maintain current prices, Ewura will be forced to step in.``

    Ewura�s course of action could be anything from mandating a price ceiling for oil dealers to conducting consultative meetings with stakeholders, including the Tanzania Revenue Authority, Samwel said, but the latter would be an involved process and unlikely to have swift effects.

    Several oil dealers claim they still have stock purchased when the global price was higher, while other factors � like the depreciation of the shilling, taxes and other charges � continue to impact their prices.

    Dealers say that Ewura uses an unrealistic template for its projected prices, which if used, would force them to incur losses.

    Masebu said that when the regulator came up with its template and used it in giving the indicative prices, only one company complained about it.

    Only after it issued the warning last week did other companies raise an alarm on the template Ewura used.
    Ewura indicative prices shows that petrol should be selling at 1,444.03/- per litre in Dar es Salaam while distant regions of Kagera and Kigoma would sell the same unit at 1,701.03/-.

    Diesel would be selling at a lowest rate of 1,482/- per litre in Dar es Salaam and 1,739/- in Kagera and Kigoma regions.

    But actual prices for petrol now ranges between 1,500/- and 1,660/- in Dar es Salaam. Diesel is selling above 1,700/- a litre.

    Samwel said although the oil dealers could be right in this instance, he was still skeptical that they could just be gunning for greater profit.

    ``We can`t rule that out,` he said. ``They are slippery when we talk of cutting prices.``

    He said that while the dealers have claimed to be selling older stocks now that the price has gone down, when the price went up consumers saw the effects at the pumps almost immediately.

    Ewura is hoping to address some of the problems it is facing by requiring bulk importation of oil in the future. Currently dealers import their stocks individually.

    ``Come next year we hope that price differences would be very minimal. All importers would source the consignment from a single company,`` Samwel said.

    ``So if one orders 10,000 metric tonnes, another 5,000 metric tonnes, they will put that together and order in bulk to avoid price differences from wholesalers.``

    SOURCE: Guardian