Adulterated fuel rampant - EWURA

Enegy and Water Utilities Regulatory Authority (EWURA) has admitted that the sale of adulterated diesel and petrol is rampant in the retail outlets across the country.

The situation has led to health hazards, vehicle damage, consumer losses and depleted government revenue.

The statement follows an inquiry conducted by EWURA in July this year, in response to allegations on collusion and windfall gains by oil marketing companies.

The statement was jointly signed by EWURA Board Chairman Simon Sayore and Director General Haruna Masebu.

During the inquiry, EWURA probed the cause of price hikes in July this year and options available in exercising the economic regulatory function in the petroleum downstream sector.

The authority found out that it was not possible to obtain proof of collusion of oil marketing companies in setting up oil prices.

However, it cited the unison petroleum price increase experienced from July 1 this year as contradicting economic theories.

In order to address the alleged windfall gains by oil marketing companies, EWURA made a comparison between the tax increase and the rise in pump prices during the month in question.

`The higher increase in petrol pump services caused the public to believe that oil marketing companies had taken advantage of the increase in taxes to enjoy windfall gains,` the statement reads in part.

The inquiry has also revealed that the petroleum supply chain had some major inefficiencies.

Among them the local fees and charges paid by importers for services to various institutions have a bearing on the final pump price.

Taken together, these contribute to instability of pump prices over time.

Other findings indicate that most petrol stations were constructed without observing the respective standards, thereby posing threat to health and safety of people as well as the environment.

`At the conclusion of the Inquiry, EWURA determined that the petroleum downstream sub-sector has some deficiencies and that the government decision to give economic regulatory functions to EWURA is timely.

This is characterized by multiple importations of small petroleum products quantities, tax evasion, lack of information and data, adulteration of products and general inefficiencies in the various segments of petroleum supply chain,` the statement says.

Following the observations, EWURA has decided that all oil marketing companies importing petroleum products shall use a bulk importation system, whereby the importation will be done competitively and transparently using an open tender system through International Competitive Bidding.

The authority has also decided that, in consultation with relevant authorities, it shall review the local fees and charges paid by importers for services provided by various institutions during importation and that all retailers shall buy petroleum products only from suppliers licensed by EWURA.

Following the inquiry, the Authority has decided that all existing operators in the petroleum wholesale and retail business are required to apply for respective licenses by December 31 this year.

A late application fee of 1,000,000/- will be charged for applications received after December 31, 2007.

In July 2007, there was unwarranted price hike of petroleum products following tax increases announced in the government budget for 2007/2008.

In August, Parliament amended the Petroleum (Conservation) Act and EWURA Act so as to give the Authority economic regulatory functions of the downstream petroleum (importation, marketing and distribution) sub-sector.