Parliamentary Committee justifies proposed fuel hike  

Scarcity of forex and disparities in the cost of foreign currency as indicated by the Central Bank and what is obtaining in the commercial banks has resulted into fuel landing into Malawi at a cost higher than that recommended by the Malawi Energy Regulatory Authority (MERA).

This is contained in a report by the Parliamentary Committee on Natural Resources and Climate Change following its engagement with the Malawi Energy Regulatory Authority (MERA).

According to Committee Chairperson Werani Chilenga, the development has compounded into failure by the Oil Marketing Companies to remit the fuel levies they collect to MERA as they are banking on the same resources to beef up their working capital.

MERA indicated that the K783 billion under-recoveries had been accumulating since May 2022 following the depreciation of the Kwacha against the US dollar by 22 percent and the lack of upward adjustment of the fuel pump prices to meet the required level as recommended by the Automatic Pricing Mechanism (APM).

It was further announced that the National Oil Company of Malawi (NOCMA)’s losses pegged at K592,435,493,010.53 include a loan of K380 billion which the company obtained from the Trade Development Bank in 2018.

Currently, the monthly losses are at K18 billion per month.

Between January 2024 to June 2024, the Price Stabilisation Fund (PSF) collected was approximately K729, 998,683.26 and total payments made to importers during the same period amounted to K1, 494,718,824. This indicates a deficit of K764 million.

Additionally, stabilization levies that had been withheld by fuel importers from January to June 2024 were composed of K27.4 billion meant for PSF, K6.1 billion for IBLC loss recovery and K4.5 billion for financing charges.

In the year 2024 from January to June, levies that have been withheld have pegged at K74.5 billion against the levies remittance of K14.4 million.

In the same period, the major levies that have been withheld include K33.3 billion for the road levy, K25.1 billion for the rural electrification levy and k14.7 for reconstruction levy.

In its presentation in Parliament on Wednesday, the Committee noted the current pump price is lower than cost of importation, suppliers are using the same levies to supplement working capital to sustain their operations and ensure continued fuel supply into the country hence proposed a reasonable fuel hike. “The Committee recommends a reasonable adjustment of fuel prices by MERA.

However, the adjustments should be strictly for the purposes of cost recovery and not for increasing profits.

“The Committee emphasized on the need for MERA to keep in mind the hardships that people in the country are already facing as a result of the calamities that the country has gone through;

“The Committee further recommends that in the future, MERA should not wait for such accumulation of loans and bills so as to ensure moderate price adjustments” read the report.

Chilenga insisted the move is a necessary evil to ensure the continuity of service provision in the country.

“By the end of the day the country will have no fuel and if we don’t have fuel, it’ll not be good for the economy of the country. It may look bad, in the eyes of the people because once fuel is jacked up; most of the things go up. But if that is not done, it will be worse than this.

“So to avoid the worst scenario its better that they adjust not for profits but for making sure that there’s fuel availability in the country”

Democratic Progressive Party (DPP) legislators walked out of Parliament in protest to the fuel price proposal recommended by the Committee.

Leader of the Opposition George Chaponda expressed discontent with how Deputy Speaker of Parliament Madalitso Kazombo refused to entertain points of order to allow members give contrally views.

“What we noted is that they wanted everyone to endorse the fuel price adjustment. We did not come into this house to rubberstamp issues but to make decisions which are for the interest of Malawians.

“The proposed fuel hike, transportation charges will increase, it’ll be difficult for people to travel the people will be walking; now do you want this situation? The situation is already bad when people are struggling with no maize, there’s increase in the price of maize, there’s increase in the price of fertilizer, the price of inflation is high, no forex in the country now they bring on top of it the issue of fuel”

Executive Director of Consumers Association of Malawi John Kapito on Tuesday backed the proposed increase to address fuel scarcity challenges.