Petrol, diesel drop as government subsidy kicks in

Dar es Salaam. Fuel consumers will from today experience relief for at least a month as measures taken by the government to rein in spiraling prices start to take effect.

The government last month announced Sh100 billion in subsidy after global oil prices rose sharply as a result of Russia’s invasion of Ukraine.

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The Energy and Water Utilities Regulatory Authority (Ewura) yesterday announced new prices which indicate a reduction from Sh3,148 per litre of petrol in Dar es Salaam for the month of May to Sh2,994 in June, while diesel also dropped from Sh3,258 to Sh3,131.

However, the price of kerosene increased from Sh3,112 to Sh3,299 as it did not benefit from the subsidy.

Ewura said the prices of petrol and diesel would have gone up to Sh3,301 and Sh3,452 per litre, respectively, if the government did not offer the subsidy.

It means that the subsidy has resulted in a relief of Sh306 per litre of petrol and Sh320 for diesel, which is the most used petroleum product in Tanzania.

Tanzania’s prices of petroleum products are governed by rules of demand and supply, but the law requires Ewura to publish cap prices for both wholesale and retail every month as the products are imported through bulk procurement system.

Fuel marketing companies are free to sell their products at a price that gives them a competitive advantage, provided that such price does not exceed the price cap computed through the approved formula for the relevant product.

“The government of Tanzania has taken various measures to address the effects of the sharp rise in oil prices and ensure the fuel availability at all times in the country. In May 2022, the President agreed to offer a Sh100 billion subsidy to control the prices on the domestic market this month,” Ewura said in a statement.

Prices of petrol will range from the lowest level of Sh2,985 per litre in Tanga to Sh3,232 in Kyerwa, Kagera Region.

The prices of diesel will also range from Sh3,131 in Dar es Salaam to Sh3,368 in Kyerwa.

The Minister for Energy, Mr January Makamba, said last month that the government would take more fiscal measures which may be announced in the budget later this month.

Other measures in pipeline, according to Mr Makamba, include allowing individual companies to import fuel for the firms that had shown interest to do so at lower prices. Currently, all fuels are imported through Bulk Procurement System in which a company is given a tender for importing.

The government also plans to establish Fuel Price Stabilisation Fund that will help to reduce prices during crises; establish National Strategic Petroleum Reserve for supplying during crisis; establish a Petroleum Hub for supplying fuel locally and to the neighbouring countries; and establishing Single Receiving Terminal that will reduce demurrage (ship waiting charges).

Mr Makamba added that the government was also empowering the national oil company – Tanzania Petroleum Development Corporation (TPDC) – so that it resumes importing fuel.

Oil price have increased in the world market from $60.27 per barrel in March 2021 to $139.13 in March this year.

The war in Ukraine war has disrupted the oil supply, forcing the prices to go up.

Meanwhile, the chairman for the tender evaluation committee of the Petroleum Bulk Procurement Agency (PBPA), Mr Ali Saeed, urged local companies yesterday to venture into the fuel importing business and raise competition that would ultimately result in reduction o pump prices.

Speaking during an event to announce companies that have won the tender to import fuel for July this year under the Bulk Procurement System, he said local companies should look for foreign partners so that they can seize opportunities to import fuel into the country.

“If we got companies like GBP, Oilcom, Camel Oil and Starcom among others, we would get the same power to drop prices because the competition would be intense,” said Mr Saeed.

Referring to a recent statement that the government was looking for alternative means that would compete with the BPS in the importation of fuel, he said the only thing the government could do was to seek more foreign companies to increase competition.

“The only solution is for the government to make a plan to go abroad and ask other companies to come and participate. That way, it will make the competition more intense and the results visible,” said Mr Saeed.