Government, fuel firms hold talks on Sh10 billion compensation

Wednesday November 03 2021
Fuel pic

A filling station attendant fuels a car in Dar es Salaam. . PHOTO | FILE

By Josephine Christopher

Dar es Salaam. Oil marketing firms and the government are currently negotiating possible compensation for losses of about Sh10 billion the companies claim to have incurred after fuel price increases were suspended two months ago, The Citizen understands.

Documents obtained by The Citizen show that oil marketing companies (OMCs) had registered losses in their gross margins amounting to over Sh10 billion in total in September and October.

The alleged losses stem from the government’s decision in September to suspend the market cap prices and directed the marketers to continue using the August cap prices.

For instance in Dar es Salaam, instead of charging Sh2,511 for a litre of petrol, Sh2,291 for diesel, and Sh2,194 for kerosene, the companies were directed to sale at Sh2,427 per litre of petrol while that of diesel and kerosene fetched Sh2,251 and Sh2,176 respectively.

Although in October, the government announced that it was scrapping Sh102 billion in levies, taxes, fees and charges for the year and the difference was calculated on the pump price starting that month (October), the reduction did not directly affect oil marketers.

This was because OMCs had already paid most levies upfront based on the original rates as a result of October supply being based on September cargo deliveries.

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The acting director general of the Energy and Water Utilities Regulatory Authority (Ewura), Mr Godfrey Chibulunje, said the authority held a meeting with the oil companies yesterday to discuss the issue and have agreed on next procedure.

“We are in a good position, as today’s (yesterday’s) meeting has also provided a positive outcome. You can also contact them for more information,” he said.

Going forward, as a result of their meeting with Ewura, the executive director of the Tanzania Association of Oil Marketing Companies (Taomac), Mr Raphael Mgaya, said oil companies have been asked to submit documentary evidence of the alleged loss incurred to Ewura for processing on how the compensations could be effected.

“Companies have now been directed to provide evidence to Ewura, to show how much they have lost as a result,” he said.

He added: “So far we have had positive response and it is our hope that the issue will be resolved in the near future to help OMCs to continue meeting their obligations, including the obligations to hold a 15 days stocks.”

Taomac said it was on the basis of that compensation commitment that the industry has been able to continue supplying in the country despite the huge loss of revenue and impact on cash flows.

Regardless of the losses, the OMCs said they will continue to support the government efforts by ensuring a continuous and uninterrupted supply of petroleum products in the country.

Meanwhile, Tanzanians will have a reprieve in accessing a litre of diesel starting today as the regular has cut it by Sh18.

Yesterday, Mr Chibulunje announced that in Dar es Salaam, diesel prices for November will be Sh18 down to Sh2,261 per litre while that of petrol will remain at Sh2,443 per litre same as October.

This he said was part of the government’s efforts to make petroleum products affordable and reduce the burden of costs to the public, as global prices continue to soar.

Mr Chibulunje stressed that the price of petrol would remain the same and the government will continue to make various efforts to control the rise in prices.

Globally, it’s forecasted that the prices of a barrel of crude oil would rise to as high as $90 per barrel come December 2021 and reach $110 in early 2022.