Government pledges to take action over galloping fuel prices

Dar es Salaam. The government has revealed what it will do to contain spiralling fuel prices, which have put pressure on the cost of other goods and services in the country.

Precipitated by the US-led sanctions in response to Russia’s invasion of Ukraine, fuel prices in Tanzania have soared, rising by Sh1,000 during the past one year.

This has sent transport costs up, and exerted pressure on the prices of various other goods and services that need to be transported to the market.

Read: More pain for motorists as fuel prices hit new record

Speaking in Parliament yesterday, Energy minister January Makamba said the government was aware of the public outcry over exorbitant fuel prices, and revealed that it was doing everything possible to work on factors that were within its control.

“The cost of oil in the international market, costs of transporting the product to Tanzania, as well as marketers’ operating costs are not within our control, but taxes and levies are,” he said when the House suspended scheduled business to deliberate on rising fuel prices.

He said the government’s detailed response to the crisis would be unveiled next Tuesday, noting, however, that it (the government) would take the necessary measures to work on taxes and levies.

“We have taken legislators’ views. The government understands the urgency of the anticipated intervention. It will soon come up with responses to the challenge,” Mr Makamba said.

Apart from working on the taxes and levies to various government departments and agencies - which jointly account for close to 40 percent of what constitutes a pump price – the government was also looking at ways of coming up with alternative ways of getting fuel suppliers who will supply the product on affordable prices.

“The issue started off in Parliament and the government welcomed people with inputs. It has received several applications and come up with a shortlist. We believe that we will get into an agreement – in a transparent manner - with those who will be able to meet the government’s laws, regulations and rules,” Mr Makamba said.

This was in apparent reference to sentiments aired in Parliament last month by Mr Ahmed Shabiby (Gairo - CCM) who said the ongoing war in Ukraine was an opportunity for Tanzania to get cheap fuel prices, noting however that some local factors were to blame for the rise in pump prices.

He specifically blamed what he described as some corrupt elements in the Bulk Procurement System (BPS) and sabotage of oil flow metres at Dar es Salaam port as some of the factors behind high pump prices in the country. He said the BPS was killing competition and thus exposing Tanzanians to high fuel prices.

“As we are talking, some tankers were selling fuel on cheaper prices – up to a quarter of the global price - in the deep sea….If you allow an individual to buy and bring fuel to Tanzania, he will go and buy from ship to ship,” said Mr Shabiby who doubles as a business man, plying a fleet of buses, filling stations and hotels among other businesses.

But speaking in Parliament yesterday, Mr Makamba informed legislators to be aware of the fact that the BPS system had been at the centre of conflict of interest among three key players in the petroleum business. These include: the filling station owner, the Oil Marketing Company (OMC) and the supplier.

“The system has always been at the centre of misunderstandings among key players. Though it (the system) does have some weaknesses, they are being amplified so that we either allow the system to operate while competing with a new one or we completely do away with it and get back to the past one (the past system before the BPS) which did not guarantee us fuel supplies,” he said noting that as government, the philosophy now was that it will do anything that guarantees us affordability.

He said much as the government was taking short-term measures, it was also embarking on medium and long term ones which include setting up a strategic petroleum reserve.

“In two weeks from now, I will sign the new regulations (on strategic petroleum reserve) because it has to start with regulations…We will explain further on this,” Mr Makamba said.

Secondly, he said, the government will also establish a fuel price stabilisation fund.

The Ministry was currently finalising a statement that will be tabled before the next cabinet meeting so that the funds can be established and help the country in situations such as the current one. “We will also explain how the fund will get money,” he said.

Thirdly, the government will implement Tanzania’s long-time dream of stabling a huge centre for fuel trading in the country. In partnership with the private sector, he said, the plan was to improve, modernise and turn Tiper (Tanzania International Petroleum Reserves Limited) into a huge fuel reserve that will be capable of storing enough fuel to be used in the country for a long time. An agreement to that goal will be signed before the end of this month, Mr Makamba said.

Fourthly, as Energy minister, Mr Kakamba said he had spoken to his colleagues in the East African region as well as in Zambia and Malawi so that they hold an emergency meeting this month to discuss ways of bringing their resources together and build a single regional market for fuel. “This will give us a key position on how we can dictate prices. We have agreed to hold the meeting in Arusha,” he said.

Hot debate

Mr Makamba’s explanation followed a hot debate in the House after Speaker of Parliament Dr Tulia Ackson allowed a motion by Kilindi MP (CCM) Omary Kigua requested the august House to adjourn its proceedings so that MPs could deliberate on the issue of the soaring prices of petrol, diesel and kerosene.

“It is an undeniable fact that there is the challenge of a sharp rise in petrol prices and when you raise the price of kerosene, it means the prices of other commodities will go up as well. The issue here is the rising prices of fuels,” he said.

Debating the motion were Mr Joseph Msukuma (Geita Urban-CCM), Mr Simon Songe (Busega-CCM), Mr Joseph Mhagama (Madaba-CCM), Mr Joseph Kakunda (Sikonge - CCM), Mr Mwita Waitara (Tarime Rural - CCM), Ms Grace Tendega (Special Seats), Mr Mageni Kasalali (Sumve-CCM), Ms Neema Lugangira (Special Seats), Mr Rashid Shangazi (Mlalo-CCM), Ms Stella Manyanya (Nyasa-CCM), Mr Twaha Mpembenwe (Kibiti-CCM), Mr Festo Sanga (Makete-CCM), Mr Zahor Mohammed Haji (Mwera Urban-CCM), Mr Ezra Chiwelesa (Biharamulo West-CCM), and the Kibakwe MP who doubles as Minister of State in the Prime Minister’s Office (Parliamentary Affairs, Policy and Coordination), Mr George Simbachawene.

Key in the MPs’ argument was their desire to see the government reducing the levies on fuel, set up a price stabilization funds and allow the government to borrow so that the funds can be used to subsidize fuel prices.

“We could cut the levies by 50 percent so that people understand that the country is in a crisis. While we reduce the levies by 50 percent, those bringing the fuel must also be willing to reduce their profits by 50 percent instead of getting their usual Sh123/litre as profit margin because we are in a crisis,” said Mr Chiwelesa.

And in her remarks, Ms Stella Manyanya said any decision to be reached should not affect the ongoing projects while the government could also look at the level of integrity in institutions that were entrusted with the setting up of prices.

“Some countries are benefitting from the ongoing war as they have become fuel suppliers. Their sanctions are affecting countries that are currently struggling to build their economies. Those bringing sanctions on products from some countries must understand that they are killing economies of poor countries for no apparent reason,” she said.