Subsidies key to fuel prices stability in Tanzania

Dar es Salaam. Stakeholders of the fuel industry are keeping their fingers crossed that the government will sustain a tendency of subsidising fuel prices as one of the ways of stabilising prices.

This comes at a time when the government is scheduled to present its budget for the financial year 2022/23 in Parliament next Tuesday.

It also comes at a time when fuel prices have been rising across the world due to resumption of economic activities after the Covid-19 lockdowns and global supply chain due to the US-led sanctions on key producer, Russia, as a response to the latter’s invasion of Ukraine.

Last month, the government announced a Sh100 billion subsidy on fuel prices that saw costs going down by about Sh300 for petrol earlier this month.

With the budget being eagerly awaited, players in the sector say they expect that the government will maintain the tendency of subsidising prices to reduce the pinch citizens feel.

They also said they would expect to see the government indicate some approaches for promoting the use of natural gas as an alternative energy in electric cars and industries in the country.

The executive director of the Tanzania Association of Oil Marketing Companies (Taomac), Raphael Mgaya, was of the opinion that the continued release of subsidies on fuel would reduce the pangs of fuel prices.

Mr Mgaya said the price of fuel in the world market had not gone down and that the government should continue subsidising the commodity.

“Fuel is a strategic and very important product. If the government continues with its efforts it has made in June this year to ensure the commodity is available at affordable prices by the end user, then it will help strengthen the economy and reduce the risk of inflation,” Mr Mgaya suggested.

For his part, Dr Olomi Donath, an economist and business specialist, also said that the issue of oil prices should be reconsidered. He added that high prices of oil may contribute to slowing down the growth of the economy.

“This is one of the things that needs to be looked at, I do not know whether the price will be reduced or not, but if the price of oil continues to be high, it could slow down economic growth,” said Dr Olomi.

In May this year, Energy minister January Makamba said the government had released a Sh100 billion subsidy to reduce the soaring price of fuel in the country, explaining that it would not affect development projects underway.

“Our President, Samia Suluhu Hassan, gave a directive that since the next financial year is still far and a relief should be sought as early as possible. So, as an emergency measure, in this period before we reach the new financial year, the government should commit itself to release Sh100 billion for reducing the pangs of the soaring prices of fuel in the country.

“This Sh100 billion subsidy will be released to reduce the price of fuel, starting June 1, 2022. This is due to the fact that wholesalers have already paid for fuel costs included in the May 2022 prices and oil traders at stations have already purchased fuel at this current price,” said Mr Makamba.

Besides fuel, Dr Olomi said it was important to focus on increasing the speed of constructing natural gas stations for vehicles and increase its supply to industries to reduce fuel consumption in those areas.

“Natural gas filling stations for cars should be built as many as possible, especially in big cities as was the case with petrol stations and factories should also be connected to natural gas energy to reduce the effects of soaring prices of the commodity,” said Dr Olomi.

In electricity, he called for policies that would enable the production of electricity by using alternatives such as water to make the country have enough power supply and from different sources.

He also suggested that the release of the budget should cover the implementation of all projects, saying some funds were being disbursed at the end of the year and sometimes they were not released at all.

University of Dar es Salaam lecturer, Dr Abeli Kinyondo, said they expect to see the strategies mentioned by the minister being implemented while saying the construction of the mentioned infrastructure, he believes, will be implemented accordingly.

He also said one of the things he would wish to see is how the government has repositioned itself to move from using fuel to using another form of energy for different activities.

“This has not been discussed thoroughly,” said Dr Kinyondo.

While presenting his ministry’s budget, Mr Makamba asked the Parliament to approve Sh2.905 trillion in the 2022/2023 financial year of which Sh2.823 trillion is being earmarked for development projects.

Mr Makamba said, of that amount, Sh2.67 trillion would be spent on development projects.

“In 2022/23 the ministry of Energy is committed to making major changes in the Energy Sector, with the aim of ensuring that oil and natural gas resources in the country contribute effectively to the development of our nation and its people and enhance access to energy,” he said.

He said his ministry would continue to address the concerns of the people, especially access to electricity as well as strengthen service delivery.

Sh4.42 trillion to end power outages

The Parliamentary Committee on Energy and Minerals has said that to ensure the country overcomes the challenge of frequent power outages, it needs Sh4.42 trillion to complete the national grid upgrade.

The chairman of the committee, Mr Dustan Kitandula, made the remarks while presenting the committee’s views on the Ministry of Energy’s revenue and expenditure estimates for the year 2022/2023.

“During the 2022/2023 financial year, Sh400 billion will be asked for Tanesco to start upgrading the national grid. The committee urges the entire amount to be released on time,” he said.

He suggested that the procedure of allocating funds for upgrading infrastructure and the national grid should continue to ensure that electricity infrastructure is operational at all times.

He said the government should look into ways of enabling Tanesco to repay a loan of Sh512.16 billion to the Tanzania Petroleum Development Corporation (TPDC).

“The government should ensure ministries and public institutions pay their electricity bills standing at Sh444.59 billion to Tanesco so that the latter can carry out its duties effectively,” he said.