ENERGY Minister Peter Kapala has disclosed that Indeni Energy Company is now importing and selling diesel.
And the Parliamentary Committee on Energy, Water Development and Tourism on the Implementation of Monthly Fuel Price Reviews in Zambia has urged government to immediately put in place measures to expand storage capacity for fuel, which will act as a buffer to stabilise prices for longer periods.
Meanwhile, Nkana Independent Member of Parliament Binwell Mpundu says although he is not an energy expert, he does not agree with UPND’s policies in the fuel sub-sector.
Presenting a report from the Committee, which was adopted by the National Assembly, Tuesday, Mansa PF MP Chitalu Chilufya said government should transform Indeni into a national oil company.
“The committee strongly recommends that Indeni Energy Company participate in the procurement and supply of petroleum products on behalf of the government in order to diversify Zambia’s sources of fuel procurement and reduce the risks associated with complete reliance on the private sector. The committee further recommends that the government considers transforming Indeni Energy Company into a national oil company to enable it to participate in the procurement of fuel in a similar manner to Namco of Namibia.
The committee recommends that the government should reassess the utilisation of the strategic reserve fund and transfer some of its functions such as road works around fuel storage depots and rehabilitation of infrastructure to the Ministry of Infrastructure Housing and Urban Development,” he said.
“Madam Speaker, let me now move to the issue of the monthly price reviews of fuel. The committee notes that the government’s decision to move to a 30-day fuel price cycle has been met with outcry by the business community and the public at large. Even His Excellency the President during the swearing in ceremony of the newly appointed permanent secretary in the Ministry of Energy acknowledged the adverse impact of monthly fuel pump price revisions on business operations and directed that the ministry investigates the issue. In view of this, the committee strongly recommends that the government should immediately put measures in place to expand storage capacity for petroleum products which will act as a buffer to stabilise fuel prices for longer periods and ensure a steady supply”.
He said the committee recommended that government enters into government-to-government fuel procurement arrangements, through Indeni.
“The committee further recommends the government considers entering into government to government fuel procurement arrangements through Indeni Energy Company as a national oil company which can help reduce fuel prices by eliminating middlemen, securing bulk pricing and negotiating favourable terms. Madam Speaker, the House may further wish to note that there have been complaints by industry players regarding the lack of transparency in the awarding of contracts for the use of the Tazama Pipeline. In this regard, the committee recommends that government take measures to enhance transparency in procurement within this sector,” said Dr Chilufya.
Debating the report, Mpundu said the country was frequently changing fuel prices because it was operating as a “hand to mouth country in as far as fuel was concerned”.
“For me, I am not an energy expert but I do totally disagree with the policy direction that the UPND government has taken in managing the fuel sub sector. In the wisdom of those that managed this country before us, Madam Speaker, two very important institutions were established: Indeni for the processing of the commingled fuel government used and also Tazama which used to transport that commingled fuel. I think for the record’s sake, it must be understood that at any given time when government used to procure the commingled fuel, a ship would be procured, docks in Dar-es-Salaam, Tazama transports that into Indeni; when that commingled fuel is separated, we used to have at least three months of our fuel needs in the country. The reason why we have to keep changing the prices of fuel every month is because we are now a hand to mouth country in as far as fuel is concerned. And I can challenge anyone – we do not even have sufficient stocks to last a month in Zambia anymore because we have left this sector to the private sector,” said Mpundu.
But adding his voice to the debate, Luena UPND MP Mubita Anakoka said the decision to move the fuel adjustment exercise to a monthly review cycle was based on sound logic.
“Madam Speaker, it is not in dispute that the cost of fuel is a major input to our economic reality and the decision to move the fuel adjustment to a monthly review regime is certainly based on sound logic and the people of Luena agree with it. But in so doing, Madam Speaker, we will appreciate in a few minutes the challenges that come with frequent reviews of the price of fuel…What are the intervening measures that we should put in place if physical storage is an issue? We must be innovative and think about financial storage,” said Anakoka.
“How can we create storage in order to minimise the impact of fuel price adjustments on a monthly basis? One of the options, Madam Speaker, the people of Luena would like to submit is let’s consider a self-subsidising mechanism where the price of fuel is set at a price higher than the formula it gives you so that you can accumulate a buffer that gives you an opportunity to only trigger the adjustments only when a certain threshold is breached. That way, we could get to the 60 days or even 90 days price adjustment mechanism. It is something we would like to submit to the Minister of Energy to consider seriously. Let’s look at the numbers and see if that is achievable while we are working on making use of the storage facilities that were constructed around the country”.
In his response to the report and various debates, Kapala said his ministry was in receipt of various proposals from stakeholders on the need to shift to quarterly fuel price review cycles.
“Madam Speaker, before I go to my prepared response, I wish to inform the House that we find ourselves in this unfortunate situation because we inherited a bankrupt treasury. We inherited a legacy debt which has now accumulated to over $800 million, so that is why we have got this problem. We appreciate the fact that yes, government has to play a role and I can inform the House that Indeni has started participating in the importation and selling [of] diesel,” said Kapala.
“Madam Speaker, allow me to also mention that the current monthly review of fuel prices creates an opportunity for government to earn its taxes from the fuel prices and there is no accumulation of arrears. In addition, the review of prices monthly is in line with international best practices in fuel pricing. The ministry is cognizant of the challenges associated with the monthly pricing reviews and has continued to explore other price adjustment mechanisms that could result in less disruptive effects on economic and business planning but also result in prices that are cost reflective to ensure security of supply. In line with the presidential directive, the ministry has received proposals from stakeholders on the need to change to quarterly review mechanisms. A report will soon be submitted to this August House as soon as the review process is
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