Zanzibar looks to join TZ in bulk oil deal to tame rising fuel prices

Saturday March 3 2012


Zanzibar is seeking to be joined in Tanzania’s bulk oil procurement system to help tame surging fuel prices, which threaten to cripple the economy.

The move would reduce the high cost of oil importation currently incurred by dealers calling at the Zanzibar port without proper procedures to control oil prices sold at high prices in the Isles.

Tanzania began bulk procurement of oil in January last year and introduced a new price calculation formula in a move aimed at lowering fuel costs, a route Zanzibar wants to take.

Fuel prices in Tanzania, like elsewhere in the region, have been rising in recent months, pushing up inflation. A letter seen by The EastAfrican sent by the Zanzibar government to Petroleum Importation Coordinator (PIC) said that Zanzibar wants to curb importers from arbitrarily raising fuel prices.

Shanif Mansoor, Chairman of the Board of Directors of the PIC said Zanzibar was also in the opinion that by joining in the Bulk Procurement would help to put in price template to the petroleum product imported to the aisles.

Since the introduction of the bulk procurement system, importation of kerosene has been reduced from 30,000 metric tonnes per month to 18,000 tonnes per month as kerosene was used by importers for adulteration.

The PIC has already opened the second tender for importation of 600,000 metric tonnes of oil products to be used between March and April. In January this year, the government appointed Augusta Energy SA to import bulk fuel from the Middle East. More than 14 oil vessels with a capacity of 600,000 metric tonnes are expected to dock at Dar es Salaam starting this week.

Minister for Energy and Minerals Mr William Ngeleja said that the government is now looking for modalities to include Zanzibar in the bulk procurement system.

Mr Ngeleja said that the move would enable effective and transparent flow of information and communication to regulators including the Energy and Water Utilities Regulatory Authority (Ewura), the Tanzania Revenue Authority (TRA) and Bank of Tanzania. They will now be able to monitor foreign currency movement in the Isles.

“The government will be cooperating with the authorities to improve the existing policies and plans that are sustainable in the development of petroleum downstream subsector,” said Mr Ngeleja.

Ewura director general Haruna Masebu said that due to the fact that kerosene and jet oil fuel were imported tax free, business people would use it to adulterate oil with the products.

“The system has also increased petrol tax by one third of the former price. After adapting the bulk procurement system we now experience decimal change of decease of price of oil in the country,” said Mr Masebu.

Tanzania handles more than 300,000 metric tonnes of petroleum products per annum that are destined to neighbouring countries of Rwanda, Burundi, Zambia, Malawi and Eastern DRC.