Sunday, May 4, 2014

How high costs of fuel importation discourages local oil companies

High cost of fuel importation charges has been cited to be an exacerbating factor which has been discouraging most local oil marketing companies from participating in tender competition process through Bulk Procurement Systems (BPS) in the country, an expert has observed. The General Manager of the Petroleum Importation Coordinator (PIC) which coordinates bulk procurement for the petroleum products on behalf of oil marketing companies in the country since its inception in mid 2012, Michael Mjinja said in Dar es Salaam early this week. Mjinja has observed that, high importation costs amounting to millions of US dollars is a prime factor that impedes most Tanzanian oil marketing companies to meet conditions imposed under BPS. He said due to financial squeeze coupled by less capital for investments has made most local oil marketing companies not to participate in the monthly tender bid competition which his firm offers for BPS in the country. He said since BPS started, out of 31 local registered oil marketing companies operating in the country, only two which have participated for tender procurement. He mentioned the companies as Gapco Tanzania Ltd and Enoc Africa Ltd both of which have ever won the tenders two times. The call by Mjinja echoed on Tuesday this week a day when the Energy and Water Utilities Regulatory Authority (EWURA) revoked licences of nine local oil marketing companies dealing with wholesale petroleum business in the country. Earlier information released by EWURA was quoted by the media as saying that, the companies violated business principles in the petroleum sub-sector resulting into their failure to conduct petroleum wholesale business for more than six months consecutively as stipulated in their contract that is contrary to provisions of Petroleum (Wholesale) Operations Rules, Government Notice No 419 of 2012. Mjinja said  moment after he had just addressed a press conference the winner of 22nd tender bid for supply of bulk oil in the country for the month of June this year which his firm conducted, for which a Kenyan oil marketing company known by its name Gapco Kenya Ltd emerged the winner. Elaborating more on the company’s inability to participate he mentioned another factor is driven on contract made between ship owners and other logistics whose process is long and rather tiresome that requires professional ability and experiences on how to handle them. “With all these hardships which are compounded by less capital for investments, is an aspect that draws back the desire of local companies to participate”, he said adding that, there is a need for the government to empower them in terms of issuing soft loans. He further noted that, because of this trend, his firm had decided to reduce the bulk volume and timeframe from two months to currently one under which the importer was subjected to accomplish the necessary laid down logistics for importation process with a view to save local companies. However, he said that, since the system was adopted six months ago, there have been a number of ships flocking at the dock of the port waiting to empty their consignments and charging between one and two USD as this is calculated per metric ton per hour. The on-going trend has assured the nation of the constant supply of fuel in the country bearing the fact that, an importer also guarantees the performance bond of $ 10 million (Sh. 16 billion). He said, the bond is to commit itself that incase it fails to meet the laid down conditions as stipulated in the laws of importation, then it has their money confiscated and never refunded. He added that, under these restricted conditions most oil companies have been obeying the order and have never strayed. The revelations prove how some oil dealers have been cheating the government and the general public by under-declaring what they import to the country, starting with where the oil was purchased, and a move that finally enabled dishonest dealers to evade paying taxes. Meanwhile, statistics made available by EWURA indicates that, bulk oil procurement has brought about an increase in tax revenue an aspect that the firm has been indicating price quotations according to the rate of supply. Statistics shows that, since bulk oil importation was first introduced, there has been a tremendous increase of supply that range between 3 and 4 percent rate according to premium offered by importing oil marketing companies in tendering processes. The system has also helped combat what is technically known as ocean fuel loss which occurs when ferrying oil from the point of origin to its destination. Controlling ocean fuel loss now enables the government to have precise statistics on fuel imports. Statistics made available shows that, it’s estimated that Tanzania uses a total of 2 million litres of petrol, 3.9 million litres of diesel, 550,000 litres of oil jet and 190,000 litres of kerosene per day. According to EWURA, the country is also a transit hub for oil products that are shipped to nations in the region including the Democratic Republic of Congo, Rwanda, Burundi and Zambia.

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