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Committee tables fuel contracts report

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PRESENTED REPORT—
Chilenga

The Parliamentary Committee on Natural Resources and Climate Change Tuesday tabled a report on disagreements

Energy Regulatory Authority (Mera) and National Oil Company of Malawi (Nocma) on the highly contentious fuel importation deals but deliberately avoided the sticky issue of over-bloated premiums.

In the report, which Dedza Central lawmaker Daniel Chiwere seconded, Natural Resources Committee of Parliament Chairperson Werani Chilenga could not justify why Malawians should pay $50 million more in the toxic fuel importation contracts.

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Mera and Nocma have been at loggerheads in recent months over bloated fuel importation contracts which Nocma intends to award to IPG and Lake Oil, despite the two firms emerging among the highest bidders in a tender process conducted last year.

According to Mera, the fuel deals are $50 million [about K45 billion] more expensive and would trigger an increase in fuel pump prices if adopted which would, in turn, hurt consumers.

According to figures given out during a meeting of Mera, Nocma and the committee last week, Nocma had opted to give a fuel importation contract to Lake Oil for the Northern Corridor under the Delivered Duty Unpaid (DDU) system and IPG on the Beira Route, despite the two quoting higher premiums.

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In the fuel importation business, premiums are mark-ups that suppliers put above the ruling international fuel price. That is to say, with the international oil price being dictated by the international market, suppliers compete on premiums or mark-ups.

The figures show that, on the Dar es Salaam route on DDU, Lake Oil is ranked number 14 in as far as the importation of petrol is concerned with a premium of $323.99 per tonne to supply the commodity into Malawi’s capital, Lilongwe.

On the other hand, the same Lake Oil ranks as the 11th expensive bidder in the supply of diesel on the Dar es Salaam route as it quoted a premium of $289.59 per tonne.

The figures also show that Nocma has opted for IPG on DDU on the Beira Route despite not being the lowest bidder.

In addition, the figures also reveal that Nocma has opted for IPG to supply fuel on an Ex-Tank system through the Northern Corridor, despite the firm not bidding on the route.

Presenting the report to Parliament Tuesday, Chilenga said Mera should operate as a regulator and follow the law and not meddle in the procurement process by suggesting suppliers that Nocma should give contracts to.

In the report, Chilenga also said the committee was of the view that President Lazarus Chakwera should consider dissolving the Mera Board.

Chilenga also said the Anti- Corruption Bureau should investigate claims which Nocma submitted on November 6 last year.

On Saturday, Attorney General Chikosa Silungwe said the mandate to give a go-ahead to Nocma to issue fuel importation contracts lied in the hands of Mera.

Speaking in Mangochi on Saturday, Mera Board Chairperson Leonnard Chikadya assured the committee that the country could not plunge into a fuel crisis as the law provides for some short-term remedies for the country to continue importing fuel in the absence of contracts.

Chikadya said Mera’s interest in this matter was to ensure that Malawians purchase fuel at reasonable prices as well as to ensure the security of supply so that there is no shortage of fuel in Malawi.

According to Chikadya, Section 36 of the Liquid Fuels and Gas (Production and Supply) Act states that the price band for liquid fuels throughout the chain of supply shall be subject to approval by Mera.

He said Mera strives to ensure that fuel supplies to Malawi throughout the chain of supply are kept at minimum prices so that the pump prices can be kept at a minimum.

On Monday, the State House said President Chakwera was sure that Mera and Nocma boards would reach common ground on the matter without breaking any law.

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