Tanzania proposes higher petroleum levy to fund budget

Tuesday August 29 2017

A petrol station in Dar es Salaam. Petroleum

A petrol station in Dar es Salaam. Petroleum importers could face higher fees as the government seeks to finance its 2017/18 budget. PHOTO FILE | NMG 

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Tanzania’s Petroleum Bulk Procurement Agency is seeking permission from the energy regulator to increase fees for oil marketing companies to help plug a Tsh2.2 billion ($9.8 million) budget deficit for the 2017/18 financial year.

The Energy and Water Utilities Regulatory Authority (Ewura) said it had received the proposal to raise oil marketers’ fees from Tsh0.50 to Tsh3 per litre.

The petroleum agency (PBPA), set up in 2015, took over the activities of the Petroleum Importation Co-ordinator Ltd in January 2016, to oversee importation of refined fuel through the Bulk Procurement System in a competitive bidding process.
Upon review of the application and stakeholders’ comments, Ewura will submit the recommended fees to the Minister of Energy.

Ewura’s acting director general, Godwin Samwel, said the agency was collecting and collating the views of the Government Consultative Council, Ewura Consumers Consultative Council, and other groups, prior to a public hearing in Dar es Salaam on August 30.

The petroleum importer is funded through various sources, including oil marketers’ fees at a rate of Tsh0.50 per litre.

The income will be generated from marketing firms’ fees, pre-qualification fees, tender participation fees, membership joining or renewal fees and penalties for late opening of letter of credits.

The fee payable at the current rate of Tsh0.50 is estimated to contribute Tsh2.4 billion ($10.7 million) to the annual budget for 2017/18 while other sources will contribute about Tsh1.3 billion ($5.8 million).

Monthly maximum prices

Kenya’s Energy Regulatory Commission (ERC) and Tanzania’s Ewura set monthly maximum prices of petrol, diesel and kerosene. Kenya’s Treasury Cabinet Secretary Mr Henry Rotich, increased petrol’s by Ksh3 ($0.03) per litre in 2015.

Kenyan consumers will bear the burden of oil marketing companies, recovering money due to the ERC’s change of tack to vary its decision contained in Kenya Gazette Notice No. 2824 of April 19, 2016. RML in 2015 rose by Ksh3 ($0.03) to Ksh12 ($0.12).

The ERC acting director general, Mr Pavel Oimeke, said $5.9 million is due to petrol cargoes discharged from July 17 to August 9, 2015 to compensate for increase of RML (Imposition of levy) (Amendment) Order of 2015.

“The recovery of this amount shall be through OTS by following Ksh0.2699 per litre in the import cost of super petrol for a period of six months,” he said.

The increase in RML was not captured in ERC price-capping formula. Under the centralised OTS supervised by the ministry, a firm that submits the lowest bid imports petrol, diesel or dual purpose kerosene on behalf of industry.

Higher levy

Oil marketing companies argued they incurred losses by paying a higher levy and not being allowed to recover the money from consumers.
Kenya’s June 2016 budget increased RML from Ksh12 ($0.12) per litre to Ksh18 ($0.17).

Marketers will recover Ksh13.2 million ($128,132.11) in six months in respect of excise duty on bulk diesel cargoes discharged from December 1 to 9th, 2015.

Exise duty went up by Sh2.061 ($0.02) effective December of the same year but was not reflected immediately in the pricing formula.

Recovery of the money will be through OTS by factoring Ksh0.3742 per litre in import cost build-up of diesel for a period of six months.

The ERC refused demands to adjust prices up to recover money in respect of RML and excise duty not passed onto consumers. The oil marketers appealed to the Energy Tribunal but the matter was in April 2017 referred back to ERC.