CAG faults Ewura for failing to manage fuel stocks

Dar es Salaam. The management of the bulk procurement system leaves a lot to be desired, the Controller and Auditor General (CAG) has noted, revealing how the situation fails to assure Tanzania of adequate supply to prevent stock-outs.

In his performance audit report for the management of the importation of petroleum in the country, the CAG, Mr Charles Kichere has faulted several aspects of the bulk procurement system.

The first issue was the fact that the Energy and Water Utilities Regulatory Authority (EWURA) failed to identify Oil Marketing Companies (OMCs) with petroleum product stocks lasting less than 15 days than the required days.

The report also faults the stock monitoring and regulation of the petroleum industry.

He said that all time analysis of the first and third weekly petroleum reports of each month from calendar year 2020 to 2023, revealed that OMCs stocks ranged from 12 percent to 62 percent for petrol and 14 percent to 65 percent for diesel-maintained petroleum stocks below the required 15 days.

“This was attributed to the tendency of Ewura to assess the total availability of fuel rather than individual OMCs’ stocks, which limited the ability to identify non-compliant OMCs,” said Kichere in the report.

Further, he said the failute of Ewura to issue a report on market shares for each product limited its ability to enforce compliance and risked disruptions in the country’s petroleum supply chain.

Consequently the issues compromised accuracy in assessing OMC’s actual stock positions, which could pose risks to the security of the country’s petroleum supply and potential disruptions in supply chains.

But in a quick reaction, the Ewura Director General, Dr James Andilile told The Citizen that the sector has passed through multiple challenges including the dollar crisis.

“As such, it is difficult for me to discuss the report findings,” he said.

Echoing Dr Andilile’s remarks on challenges, the executive director for the Tanzania Association of Oil Marketing Companies (Taomac), Mr Raphael Mgaya said since 2020 the industry has been passing through many challenges that started with the impacts of the Covid-19 pandemic.

He said the Covid-19 disrupted global and domestic supply chains, the issue that Tanzanian OMCs are still grappling with.

“The Covid-19 pandemic caused both the demand for petroleum products and the prices to drop,” he said.

According to him, in the aftermath of the pandemic-induced lockdown, companies found themselves with excessive stock that they were unable to sell, leading to substantial losses.

He noted that before they could recover, the war in Ukraine erupted which also disrupted the supply chains with the cost of fuel rising.

“We also had to face the dollar crisis which adversely affected the industry,” he said.

According to the secretary general for Tanzania Petrol Stations Operators Association (Tapsoa), Mr Tino Mmasi, fuel was indeed imported. However, due to shortages in foreign currency, they encountered difficulties in settling payments with suppliers and in paying taxes. Consequently, the fuel could not be registered in the system.

“There was a financial holding. The fuel is in the country, but it is not seen because it has not yet been registered,” he said.

Meanwhile according to the CAG report, the National Petroleum and Gas Information System (NPGIS) did not perform as required by Section 124(1) of the Petroleum Act [CAP. 392] requires.

The CAG said the audit found Ewura did not manage to Integrate NPGIS to capture the stock position of the Petroleum in an electronic and automated way.

“In a review of the NPGIS, the audit found that although the system was operational in a live environment and was hosted at the National Data Centre since November 2021, it did not succeed electronically and automatically in capturing positions of the stock of petroleum products.

A review of the petroleum operations audit for the financial year 2022/23 revealed that this was attributed to a delay in identifying suitable system operators to facilitate the automatic flow of data.

Ewura, the CAG says, took two years to initiate efforts to integrate NPGIS with systems operators to enable automated data exchange.

Another contributing factor was an excessive reliance on the manual lodging of the position of the petroleum stock through the NPGIS.

He said as a result, Ewura’s NPGIS system could not collect the most real-time operational data from regulated entities in the petroleum industry as of the time of this audit.

Further, he said Ewura did not enforce OMCs and retailers (Petrol Stations) to log the stock position of petroleum products to NPGIS Daily Rule 30 of Petroleum (Wholesale, Storage, Retail, and Consumer Installation Operations), 2022 that requires all licensees to disclose information to Ewura.

“The audit analysed the OMCs who reported in the NPGIS and found that 26 out of 65 licensed wholesalers, equivalent to 40 percent partially provided daily information on petroleum products’ stock level,” he said.

A review of the Mid and Downstream Petroleum Subsector Performance Review Reports for 2020 and 2021 revealed the lack of a single receiving terminal for white petroleum products.

“This would ensure that products were received within a short period, thus reducing demurrage costs. During the transitional phase, the Government temporarily utilised TIPER’s infrastructure as an SRT for diesel. However, this fell short of demand as the TIPER’s capacity was not enough to accommodate the volume of diesel discharge,” he said.