Malawi Energy Regulatory Authority (Mera) says it has started reviewing fuel pump prices to reflect the landing costs of the product and address challenges the country is facing due to low pump prices.
The regulator’s move follows calls from various stakeholders, including members of Parliament (MPs) and Consumers Association of Malawi (Cama) to increase fuel prices to enable Mera to remit fuel levies to government ministries departments and agencies for various development projects.
Currently, Mera is failing to remit money to Roads Fund Administration (RFA) and Ministry of Energy, which requires levies to run the Malawi Rural Electrification Project (Marep), among others.
Speaking when Mera officials appeared before the Parliamentary Committee on Commissions, Statutory Authorities and State Enterprises in Lilongwe yesterday, Mera director of finance Zacharia Ng’oma said their board has started reviewing fuel prices.
He said failure to adjust fuel prices upwards in line with the movement of kwacha, inflation rate and changes in international prices, has heavily affected the government’s capacity to recover working capital for fuel importers.
Said Ng’oma: “Prices of petroleum products need to be adjusted to reflect the cost of bringing that product into the country. The [Mera] board is aware, as an authority and they are working exactly on the same thing. As we speak, prices are indeed supposed to go up.”
He said they had a meeting with government authorities on the extent of fuel price increase.
“A decision was made to start with two products that were adjusted early this week.
“We just hope that we are going to have a common understanding to address this challenge that the country is currently facing,” said Ng’oma.
He said fuel prices need to be adjusted upwards to stop losses importers are incurring and for the levies to start flowing to various beneficiaries for their operations.
However, Ng’oma could not provide a timeframe when the prices will be adjusted, saying the decision involves various stakeholders.
“We are in touch with government, especially the Ministry of Finance and Economic Affairs on the impact of the prices as we sit, looking at the combined effect of the international prices as well as the Malawi kwacha exchange rate.”
He said government has considered two products; liquefied petroleum gas (LPG) and aviation fuel.
On Monday, Mera announced a 15.25 percent price increase for LPG due to the impact of the depreciation of the Malawi kwacha. The move saw the price being adjusted from K3 245 to K3 740 per kilogramme effective October 16.
In November last year, Mera also adjusted the price of gas by 32 percent from K2 450 to K3 245 following the depreciation of the Malawi kwacha against the South African Rand by 41 percent.
Taking his turn, RFA chief executive officer Stuart Malata said they are banking on the unlocked fuel levy from Mera to maintain some of the country’s roads.
He said with the rain approaching, some roads will get damaged; hence, there is a need to maintain them.
“We are banking on the same fuel levy that once the situation is resolved, then we will collect the arrears and clear what we owe contractors,” said Malata.
Parliamentary Committee on Commissions, Statutory Authorities and State Enterprises chairperson Bintony Kutsaira said fuel prices need to be adjusted upwards if the country is to make progress.
He said the decision could affect Malawians, but it is in the best interest of the country.
Kutsaira called on Mera to act swiftly on the matter, saying it is holding Malawi at ransom.
“Apart from road projects, Marep has also been affected by failure to address the issue of levies [totalling about K102 billion]. Malawians cannot continue to suffer because of delays in making decisions.
“People want electricity in rural areas, but you have affected the programme due to non-remittance of the Marep levy on fuel. Marep 10 cannot roll out and there are also challenges to complete Marep 9 just because of the issue of fuel prices,” he said.
One of the committee’s members, Joseph Mwanamvekha, wondered why Mera is not using the Automatic Pricing Mechanism (APM), adding that fuel prices in the country are way below the landing cost; hence, the expectation was to effect adjustments.
Since 2012, Malawi has been using APM where ruling pump prices are in line with movements in international prices for petroleum products and the local currency value against major trading currencies. Prices are reviewed on a monthly basis.
Said Mwanamvekha: “If the automatic pricing mechanism was being used, we would not be in this situation because prices automatically go up.”
Recently, Cama executive director John Kapito urged Mera to increase fuel prices to reflect the reality on the ground.
Ministry of Energy, which implements Marep, also cried foul that it has failed to access K102 billion from the fuel levy, while the RFA is owed over K104 billion.
