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Fears over fuel fund abuse

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The removal of Petroleum Importers Limited (PIL) as one of the signatories to the Price Stabilisation Fund (PSF) has left the account vulnerable to the whims of the government, Malawi News can report.

PIL is since keeping fingers crossed hoping that the situation will not degenerate to impact on fuel availability in the country one day.

The Price Stabilisation Fund (PSF) is a fund through which fuel importers in the country remit money to the government. The main purpose of the fund is to ensure continued importation of fuel into the country.

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Over the years, PIL has been one of the signatories to the account until recently when Malawi Energy Regulatory Authority (Mera) removed PIL as a signatory.

This effectively weakens the system for checks and balances of the fund.

And in what could be a signal of the plunder that the fund could suffer in future, the account had K3 billion withdrawn in February this year for the purpose of buying maize for Admarc.

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It is understood that the decision was based on the recommendation of top authorities at Mera.

The Treasury demanded action on the matter as the decision, it said, was in contravention of the Energy Regulation Act and the Public Finance Management Act which do not empower Mera to purchase maize.

PIL Chief Executive Officer Enwell Kadango confirmed in an interview that his organisation was once a signatory to the PSF account but that has since changed.

He said PIL hopes that the money will always be available when the fuel importers’ body needs reimbursement from the fund.

The PSF was created to ensure there is a cushion to the fuel importation in the country. Fuel prices are determined each month through automatic pricing mechanism.

When the cost of landing the product is lower than set pump prices, the over recovery is deposited in this PSF account and when landed costs are higher than the agreed selling price, importers would not recover their costs which is called under recovery.

“In such case, importers must be reimbursed from the same PSF account for the loss made. This being public money, it needs checks and balance to ensure the money is used for its intended purpose,” Kadango said.

He added that Mera removed PIL as a signatory to the account on the advice from the government.

“As you have noted PIL used to be part of the signatories to the PSF account which is not the case now. The reason given to PIL by Mera was that government advised Mera to remove PIL because there are many importers in the country, hence no need for a particular importer to continue to be signatory to this account.

“PIL believes [that] as the major importer, [it] should have still been on the list of the signatories to this account because the major imports are done by PIL. In the event that this money runs out, the country risks fuel shortages as importers will not be able to pay the suppliers because they would not have recovered the full cost of importing the product and over time fail to pay the Supplier who may cut supplies,” he said.

He said the fund also helps in stabilising the fuel prices because during months where there is minimal movement either on global prices or exchange rates, this fund has been handy.

“Should this fund be depleted, one day importers may fail to pay the suppliers in the event of serious under recoveries which would normally happen with upward changes in global prices and or Malawi kwacha value erosion,” warned Kadango.

Malawi News has established that at the time a decision was made to divert the K3 billion, the importers were recording under recoveries that needed to be reimbursed.

Re-imbursement was done but not on schedule as required by law.

Asked to explain why Mera removed PIL as a signatory and how it now ensures transparency and accountability of the public money, Mera spokesperson Fitina Khonje said she was on leave and referred us to the CEO.

Mera CEO Ralph Kamoto did not respond to our questionnaire.

Treasury spokesperson Nations Msowoya only said that the account indeed needs transparency and accountability being public money.

But he was at pains as to explain why the public is not represented as the signatory of the account.

Catholic Commission for Justice and Peace (CCJP) Acting National Secretary Martin Chiphwanya demanded transparency and accountability in the PSF account.

“Corporate governance requires that entities and organisations transact in an open manner. Lack of transparency and accountability gives room to abuse of resources.

“As the country is trying to fight and recover from Cashgate and its related effects, it is important that every Malawian should feel responsible enough and adhere to policies and procedures,” said Chiphwanya.

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