Mon, 14 Nov 2016 10:07:21 +0000
THE Government has been cautioned to put on hold plans to disengage from fuel procurement until it has built enough strategic fuel reserves to last a minimum of 90 days. Energy Forum Zambia chairman Johnstone Chikwanda said he was opposed to the Government’s stated policy to disengage from petroleum procurement because the country had not yet built enough fuel tanks to hold sufficient national strategic reserves to last 90 days in line with global best practice.
He said the proposed policy should be handled cautiously because the country often had fuel reserves covering less than a month, and also the combined storage capacity held by the private sector was not enough to be entrusted with the national responsibility at a time when fuel consumption had significantly increased.
He also expressed concern over the possibility of a situation where everyone started to import from different sources because product quality control would become a major issue especially that some importers would have to share storage facilities since there was inadequate storage facilities in the country, and several oil marketing companies (OMCs) did not have their own storage facilities.
Mr Chikwanda said the Government should not be in a hurry to implement the proposal without adequate safety measures owing to the fact that African economies, including Zambia, were fragile, saying that would mean the OMCs calling for frequent fuel price increases, failure to which they might not import fuel. “It may seem easier especially that it was implemented at one time; but that was some decades ago when fuel demand was not this high and the global economy was not as fragile. Whatever has caused Government involvement to become unsustainable and inefficient may also affect private players, given that Government will still control the price,” he said.
Mr Chikwanda feared that in a situation where oil marketing companies could refuse to import fuel on account of Government failure to increase the pump price, that would affect the country. “The power of transnational OMCs must never be underestimated, and from a financial perspective, a number of OMCs have actually been struggling to comply even with the most basic license requirement of keeping a minimum of 15 days of stock in their tanks at any given time,” he said.
He said Government fuel procurement still remained a better option and had the potential to lower pump prices even without subsidies. Mr Chikwanda explained that by disengaging without adequate measures put in place the Government was transferring a multi-billion dollar business into the laps of transnational OMCs which dominate the local market.
“The forum appreciates the significant challenges Government is facing and remain hopeful that it will placate the nation without exposing it to significant risks through rushed decision implementation which is not anchored on adequate safety measures, and as the forum, we wish to assure Government of our support in pursuing progressive
policies,” he said. Minister of Finance Felix Mutati in his 2017 budget address to Parliament last week stated that with effect from 1st March, 2017, Government will disengage from the procurement process of refined petroleum products and allow the private sector to import fuel for themselves, and that the Government will remain with regulation which include control of pump price.