Government says oil marketing companies withholding fuel

Government says oil marketing companies withholding fuel


Energy minister Matthew Nkhuwa has claimed that Oil Marketing Companies were holding back fuel to push for price hike.

“The last time, if you remember, when we increased the price of fuel, the dollar was at K16.50. And today the dollar is at K21.50. And also, the international oil market price per barrel was going at $30. And today, the barrel is about 53, 54 dollars. So, obviously it means that the Oil Marketing Companies are holding back this fuel which they should sell… and then they were pushing for a price hike,” he said. “And they are saying that they’ve stopped ordering and some of them are holding on to the stock that they have so that the price can be adjusted [upwards].

But then looking at the situation at hand of Covid, people are not working and we wouldn’t like to hike the price. So, we looked at the prices…and then removed the VAT so that we cushion members of the public on fuel…because you realise that if fuel goes up it will spark the price of everything going up. So, we don’t want to push inflation by increasing the price of fuel.”

He said the government was finalising a letter of credit with the banks to guaranteed the payment adding that Indeni would have crude stock in a few weeks’ time.

“We have a debt we are clearing week-by-week. It’s not a fixed debt. It’s evolving as they are clearing it. From the last time we checked, we were owing about just under $500 million,” said Nkhuwa. “We are clearing it. We are paying very week. So you know, it’s going down. And maybe this time, I don’t know what it is, but I know that it is going down…. By end of year, yeah, by end of 2021 we should be able to, yeah, finish.”

According to the Economic Recovery Programme 2020-2023, “government policy is that fuel pricing should be cost reflective. In the recent past, however, arrears have arisen which is not consistent with the Policy stance. As at end-June 2020, government had a debt of US$727.3 million owed to suppliers which has accumulated since 2016. The debt has accumulated as a result of the price differential between the purchase price and the landed cost of petroleum products. The debt is further exacerbated by the exchange rate losses due to the depreciation of the Kwacha to the United States dollar”.

To prevent the exposure of the fuel suppliers from growing, during the ERP government planned to implement among others, direct sales of outstanding contract import balance to Oil Marketing Companies, standardisation of suppliers’ contract prices, and price adjustments.

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