Why fix it if it is not broken?

Tom Sangala June 24, 2017

368 1 minute read

Ministry of Energy and Natural Resources officials have a lot to explain to Malawians, in terms of the motive behind their decision to take the more expensive route that will cost the country K3 billion more to import fuel reserves when there is a method currently obtaining that does not require such an expenditure from the Price Stabilisation Fund.

In other words, what has gone amiss and who is benefitting from the change?

When the National Oil Company of Malawi Limited (Nocma) decided to stock the newly constructed fuel reserves using the method called Duty Delivered Unpaid (DDU), where the supplier uses own transport to deliver fuel, the Malawi Energy Regulatory Authority (Mera) was very clear that such as an option is not the best there is since the rates given did not demonstrate that petroleum products would be landed at a competitive price equal to or below cost currently obtaining in the existing importation regime (ex-tank basis) – where the supplier does not provide transport.

Indeed, Mera notes quite clearly that there is no other economic benefit to the country if such a DDU method was adopted.

Mera then raises other problems to the arrangement, arguing: “The proposed shift to DDU incoterm after evaluation of bids could be viewed to be unfair to the suppliers who submitted bids in January 2017. This may be contravening [the] Public Procurement Act as the rest of the bidders were not given the opportunity to participate in the tender by submitting the new premiums under the DDU incoterm.

“This would, therefore, expose Nocma to lawsuits from suppliers and would in effect delay the whole procurement process of the petroleum products.”

Surprisingly, Nocma ignored such technical and well reasoned advice and they decided to appeal to their supporters at the Ministry of Energy and the result is that a figure of K3 billion will be added to the fuel bill that the country must incur just to fill its reserves.

Nocma’s argument that the whole idea is to transfer the risk of transporting the fuel to the supplier does not hold water because the government company has not produced evidence which shows that the country has been losing huge quantifiable amount of fuel because it was being ferried through the ex-tank method.

And so we go back to our basic question, why the hurry and why fix something when it is not broken?

After all, when all is said and done, we are talking about fuel reserves here as the day to day requirements are also taken care of by a parallel method of procurement that also involves private consortium, Petroleum Importers Limited.

There are more questions than answers and more than what meets the eye in this deal.

The Ministry of Energy owes Malawians an explanation on who is benefitting from the method that Nocma favours to import fuel reserves.

It is certainly not Malawians.