A few days after oil dealers faulted the newly introduced bulk oil procurement system by the Energy and Water Utilities Regulatory Authority (Ewura), fresh details from both the regulator and Petroleum Importation Coordinator (PIC) reveal how the industry is marred by under-declaration of import data.
The revelations prove how some oil dealers have been cheating the government and the general public by under-declaring what they import to the country, starting with where the oil was purchased, a move that finally enabled dishonest dealers to evade paying taxes.
In separate interviews, both Ewura and PIC defended bulk oil importation, saying dealers, customers and the nation have begun benefiting from the arrangement. PIC is an umbrella organisation of the Tanzania Oil Marketers Association formed to oversee jointly with Ewura the tendering process of bulk oil importation.
Ewura ‘s principal communications and public relations officer Titus Kagua told ‘The Guardian on Sunday’ that the system has brought about tangible benefits, as opposed to the claims levelled against it by the critics.
According to Kaguo, since the government started implementing the strategy pump prices have remained relatively stable despite the increase in crude oil prices on the world market.
Kaguo explained that the stability of oil prices in the country has partly been contributed to by a reduction in what is technically known as ‘demurrage cost’ which oil importers were incurring at Dar es Salaam port.
The term ‘demurrage’ originated from vessel chartering (notably voyage chartering) and refers to the period when the charterer remains in possession of a vessel after the period normally allowed to load and unload cargo. By extension, demurrage refers to the charges that the charterer pays to the ship owner or operator for the extra use of the vessel.
In this context, Kaguo explained in simple language that demurrage costs are extra charges that oil importers were incurring as a result of delays in clearing of petroleum products at Dar es Salaam port.
He said on each passing day each oil importer was charged USD 30,000 as demurrage cost, something that contributed to pushing up pump prices since such costs were recovered from the end-users.
According to Kaguo, bulk oil procurement has reduced the delays in clearing of petroleum products at the port from 15 to only four days. It has also been documented by EWURA that before the bulk procurement system came into force it could take between 40 to 60 days before an oil cargo could be cleared at the port.
Furthermore, Kaguo stressed that apart, from benefiting from the bulk procurement system EWURA, as an entity, had effectively played its watchdog role, considering the fact that despite the price of a single barrel of crude oil reaching USD125, local pump prices had been fairly controlled. Three months ago the price of a single barrel of crude oil was trading at USD 100 on the world market.
“Despite complaints from a section of the public over high fuel prices, the bulk procurement system has enabled the prices to remain fairly stable. For instance, in Dar es Salaam region where in 2008 a litre of petrol reached Sh 2,200, today the same amount of oil is yet to reach the price level,” Kaguo said.
Elaborating on further benefits brought by the system, Kaguo said traffic at the port had also been reduced, accounting for 74 per cent in efficiency. This, he said, had been made possible due to a reduction in the number of days that an oil tanker now stays at the port for cargo clearance.
He added that as a result of bulk oil procurement, the government can now compute or foresee the exact amount of oil imported or to be imported, a factor that enables it to have proper future plans.
According to Kaguo, bulk oil procurement had also brought about an increase in tax revenue. Though h would not come up with concrete figures in revenue increase from oil imports, data from EWURA showed that between January and February, this year, when bulk oil importation was first introduced a total of 412,712,795 metric tonnes of oil were imported while during the same period in fiscal year 2011 only 382,261,877 metric tonnes were imported.
The system had also helped combat what is technically known as ocean fuel loss. According to Kaguo, ocean fuel loss occurs when ferrying oil from the point of origin to its destination. Controlling ocean fuel loss now enables the government to have precise statistics on fuel imports.
Speaking about reports that the system had caused loss amounting to Sh 11 billion due to sabotage in the tendering procedure, particularly on the opening of the second tender on January 27, this year, that saw Augusta Energy S.A winning the bid, Kaguo said such claims were baseless since the opening of any tender was done according to the directives of the bid document.
He said each bidder was directed to submit three bid documents, one of which was the original document while the other two were copies, but all put in one sealed envelope. He said Addax Energy submitted three copies, each in a separate envelope.
Though Addax was the lowest bidder among the three - Augusta Energy S.A, Addax Energy and Reliance Industries Limited, the company was not awarded the tender for violating the tender directives. Instead Augusta Energy S.A won the bid at a premium of USD 67 per metric tonne. Addax’s rate was USD 50 per metric tonne while Reliance Industries Limited, which emerged second, had a premium of USD 70.83 per metric tonne.
If Reliance Industries Limited, with its bidding rate of USD 70.83 per metric tonne, was awarded the tender the nation would have saved Sh 5.7 billion while were Addax Energy to have won the bid the nation would have saved Sh 6.2 billion. Kaguo concludes that no company would have saved Sh 11 billion among the three by winning the tender.
Mid this month the oil marketing company faulted the tendering system overseen by the Petroleum Importation Coordinator (PIC), saying it had failed to lower pump prices as expected.
It claimed that the last tender to import 600,000 metric tonnes of petroleum products for March and April, this year, which was won by Augusta Energy, cost the nation some USD7 million (approximately 11bn/-).
It further claimed that it was the same company which had won the tender to import 553,000 metric tonnes of fuel for January and February when the system became operational early this year.
It claimed that during the opening of the second tender on January 27, this year, the Geneva-based company had offered a premium of USD 67 per metric tonne, higher than USD 50 per metric tonne offered by Addax Energy, but still won the tender.