Ewura seeks to reduce cost of oil importation

Dar es Salaam. The Energy and Water Utilities Regulatory Authority (Ewura) is looking for a better way of reducing oil import charges.

By so doing, benefits will be passed on to customers.

The regulator’s initiative will involve identifying banks that will finance the importation of petroleum products at a less cost, according to Ewura director general Felix Ngamlagosi.

Currently, each oil marketing company opens a letter of credit (LC) with a bank at different terms, something which increases demurrage charges and the importation costs which in turn are passed on to consumers.

Mr Ngamlagosi told a stakeholders’ meeting here yesterday that currently more than 16 LCs were opened for each shipment.

The situation means a lot of time is time wasted and paperwork is done, causing delays to some oil marketing companies in opening and confirming LCs in favour of their consigment.

“This leads to unnecessary demurrage charges. Business risks are increased and the number of participating companies in bulk procurement system tenders is reduced,” he said explained.

The regulator and the Bank of Tanzania evaluated an option of having one commercial bank or a lead bank with a consortium of other banks that would open one LC to finance petroleum products importation through bulk procurement system, he said.

“To reduce the financing cost arising from multiple LCs and increase efficiency in the petroleum supply chain, a single LC which will be opened by a commercial or lead bank is recommended,” said Mr Ngamlagosi.

Statistics indicate that about $300 million is required every month to pay for petroleum products.

“Of which oil marketing companies are supposed to pay 1 per cent as LC.”