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Bulk oil importation is better than greed, cartel and monopoly

1st April 2012
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Editorial Cartoon

For the past two weeks some greedy oil dealers have formed a cartel to discredit the newly introduced bulk oil importation, claiming that the new system was denying the government $7million (Sh11.2billion) every month in revenue.

The cartel, backed by some greedy and corrupt politicians, infiltrated their spin in some sections of the media in bid to pressure the government to abandon bulk oil importation or to award the tender to one of their own.

To back their claims, they chose a single factor of pump pricing, saying bulk oil importation had totally failed to reduce the price for consumers, contrary to earlier claims by the government.

They also attacked the Petroleum Importation Committee, accusing it of favouring some foreign-based bidders at the expense of the locals. All these noises were driven by greed, corruption and personal interests.

The truth of the matter is that bulk oil importation has exposed massive cheating, under-declaration and tax evasion in the lucrative oil industry. We are all aware of how this sector has been steeped in tax evasion, smuggling and adulteration during the past decade. For instance, between January and February, this year, when bulk oil importation was first introduced, a total of 524,000 metric tonnes of oil have been imported.

However, during the same period in 2011, before this system was introduced, statistics show that only 202,000 metric tonnes of oil were imported, which goes to prove how cheating and under-declaration marred the industry.

How can the demand for oil surge dramatically by over 100 percent just after introducing bulk oil importation? This is just a drop in the ocean, according to sources within the oil industry.

For March and April, 2012, a total of 600,000 metric tonnes will be imported, while in May and June, the amount will increase to 640,000 metric tonnes. Therefore, the first advantage of bulk oil importation is curbing tax evasion because there won’t be massive cheating and under-declaration that has clouded the industry for so many years.

Let us give bulk oil importation a chance. It will help this country a lot, contrary to what the critics would have us believe. We know that their zeal in opposing the system is driven by greed and personal interests.

A decline or increase in fuel prices is determined by factors beyond bulk oil importation. There are global factors like the unrest in the Middle East, especially in Iran, Iraq, Syria and the entire Arab world. Other global factors include the Euro Zone crisis, the strong economy of China that drives oil demand upwards and other related production factors.

At the local level, you have the weakening shilling against major international currencies, mainly the US dollar, and high transport costs from the entry port to the final destination. All these factors can’t be cushioned by bulk oil importation. There may be some technical glitches facing the newly introduced system, but it’s too early to abandon it simply because some greedy guys are no longer getting the super profit they used to rake in through tax evasion and cheating.

Sections 33(1) and 33(2) of the Petroleum Act (2008) states that all petroleum imports for the Tanzania local market should be procured through an efficient and competitive system.

Based on that, the Energy and Water Utilities Regulatory Authority (EWURA), from the year 2009, had to develop a mechanism by which petroleum products would be imported through a legally-defined system, which is the Bulk Petroleum Procurement System (BPS).

Therefore, oil marketing companies formed a company (Petroleum Importation Coordinator-PIC) that will be handling all matters related to the operations of BPS, of which the first cargo under the system is being imported.

What is needed is to improve the bulk oil importation system by making it more transparent, fair and honest, especially for those who have been tasked to supervise it. Let us stop cheap politics against bulk oil importation, which is driven mainly by greed and corruption.

SOURCE: GUARDIAN ON SUNDAY
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