More pressure on fuel prices
B arely one week after The Nation exposed Malawi Energy Regulatory Authority’s (Mera) suffocating indebtedness from artificially low fuel prices and importers’ dwindling working capital, pressure is mounting on authorities to raise fuel pump prices to avert looming fuel stock-outs.
This time around, the Consumers Association of Malawi (Cama), an unlikely source, has asked the energy regulator to adjust fuel pump prices to reflect the realities of landed costs.
On the other hand, legislators were divided in Parliament yesterday on the recommendation of the Natural Resources and Climate Change Committee that Mera should adjust fuel prices to improve fuel supply. However, opposition Democratic Progressive Party (DPP) boycotted the debate.
In a press release dated August 23 2024, Cama said the shortage of fuel experienced before has had serious negative economic and social effects on consumers who were forced to source the commodity at high prices from the parallel market.
Reads the Cama statement: “Consumers Association of Malawi is requesting [Mera] to immediately adjust prices of fuel to avoid unnecessary impending fuel scarcities that will hurt both the consumer and the whole economy.
“Mera’s mandate is to regulate and not to control prices of fuel and that prices of fuel must never be politicised and Mera should maintain its independence and refrain from creating unnecessary challenges to both the consumers and fuel importers.”
The Nation last week reported that fuel importers have incurred K785 billion losses which Mera must pay in compensations.
Mera’s failure to reimburse the under-recoveries has now forced fuel importers, desperate to shore up their working capital and keep trading, to withhold K330 billion in levies.
In an interview yesterday, Cama executive director John Kapito said either way, selling fuel at a loss leading to scarcity or upward adjustment of fuel prices to ensure availability and profit is a bitter pill to swallow, but the latter is the better devil.
But Centre for Social Accountability and Transparency executive director Willy Kambwandira has faulted Cama’s recommendation, describing it as insensitive to the economic hardships facing Malawians.
Asked to cite the sustainable ways of dealing with losses, he said there is need to “seriously implement the Public Finance Management Reforms, control our expenditure, curb mismanagement of resources and improve our revenue collections”.
But economists we talked to last week called for effective implementation of the automatic pricing mechanism (APM), saying only cost-reflective fuel prices are sustainable.
Mzuzu University-based economist Christopher Mbukwa said: “I see a case of a pricing structure that is sub-optimal, that is, it is not reflecting reality as such it is working against some players; hence, they are not willing to respect it.”
On his part, Dalitso Kubalasa, a long time public finance and economic governance analyst—while agreeing that effective application of the APM is the most sustainable path—urged a balanced approach to protect interests of both importers and consumers.
Mera consumer affairs and public relations manager Fitina Khonje yesterday said Cama’s calls were based on factual analysis of the situation, but the Mera board has always been monitoring the situation and will make an announcement at the right time.
Meanwhile, the majority of legislators yesterday appeared to back the recommendation of the Natural Resources and Climate Change Committee for Mera to effect an upward adjustment of fuel prices although DPP boycotted the debate.
A Treasury source earlier confided in The Nation that the Mera board has already recommended new prices to government and that President Lazarus Chakwera has been briefed and is being nudged to approve.
Presidential press secretary Anthony Kasunda yesterday said he was yet to check if the President has acted on the issue. n
Additional reporting by STEVEN PEMBAMOYO, Staff Reporter
