Malawi Energy Regulatory Authority (Mera) board has come under fire for flouting energy laws by dancing to political masters’ tunes in the regulation of fuel pump prices.
Various industry and legal experts said on Tuesday that the Liquid Fuels and Gas Act mandates the Mera board to review petroleum pump prices based on changes in set variables without waiting for approval from anyone, not even the President.
Mera has, despite its board having a strong case for upward fuel adjustment, failed to act, thereby contributing to the current fuel shortages as import losses erode the working capital needed to bring in the product.
For over a year now, Mera has maintained pump prices despite changes in variables such as the exchange rate and global fuel prices in excess of the trigger band of plus/minus five percent, largely due to political imperatives, including President Lazarus Chakwera’s concerns that a rise in pump prices could worsen inflation.
Apart from the under-recoveries that a senior Energy Ministry official on Tuesday estimated at around K1 trillion, maintaining artificial fuel prices has left Mera unable to collect road maintenance levy and rural electrification levy, derailing construction and rehabilitation of roads as well as implementation of Malawi Rural Electrification Programme (Marep) phase nine, which targets poor communities, in the process.
Private practice lawyer Khwima Mchizi said under the Liquid Fuels and Gas (Production and Supply) Act, Mera is obliged to raise the prices without being pinned by the Executive.
In an interview on Tuesday, he said: “There is a law that mandates Mera to adjust the prices and it is not a political choice that they have, it is a legal mandate and they have to exercise that independently.”
Reacting to the scenario, Consumers Association of Malawi executive director John Kapito said the failure to raise pump prices was simply a political decision.
He said: “What is better: to keep the same pump price and have this scarcity continue punishing the same people that they are trying to protect? People are already buying the same fuel at double or more than the pump price!
“The scarcity has created more pain than if they had raised the price to a regulated figure. The product is not available, so what is the government protecting consumers from? We have K2 trillion debt on fuel, how do we pay that back? Is it not the same person?”
Kapito, who was once a member of the defunct Petroleum Pricing Committee, wondered why Mera seems to have abandoned the automatic pricing mechanism (APM) which was meant to balance fuel pricing in the country.
In a separate interview, Parliamentary Committee on Natural Resources chairperson Werani Chilenga wondered why government was sitting on a report adopted by legislators which, among others, recommended increasing pump prices.
By August this year, Mera owed petroleum importers K785 billion in compensation for losses after the Price Stabilisation Fund was depleted. National Oil Company of Malawi had the highest loss claim at over K590 billion followed by PIL at K156 billion.
In an interview on Tuesday, a former public sector senior energy executive, speaking on condition of anonymity, said the law was clear that Mera should act independently of any influence.
Said the executive: “What I see is a board that does not have people from other sectors such as transport, the central bank and Treasury that are critical in making tough decisions. These are critical in making the tough decisions in terms of forex situation, inflation and others.”
The source also said another challenge was that government historically buys fuel at higher cost than private players such as Petroleum Importers Limited (PIL) . He said there are mark-up costs on fuel that end up in the pockets of a few people due to corruption.
Minister of Energy Ibrahim Matola on Tuesday referred he issue to Mera and Treasury, but when contacted Ministry of Finance and Economic Affairs spokesperson Williams Banda threw the ball back to Matola’s ministry.
Mera consumer affairs and public relations manager Fitina Khonje said in a brief response that no decision has been made on the matter.
Minister of Information and Digitisation Moses Kunkuyu, the official government spokesperson, could not be reached for comment on Tuesday, but he is on record as having said President Chakwera was concerned that raising the price may negatively affect Malawians. Under the Liquid Fuels and Gas (Production and Supply) Act, Mera has to look at the cost of haulage, the weighted cost of storage and government taxes and levies imposed on importation , transportation or sale of the product to effect price changes.
