Fuel price increase was inevitable—Kazako

By Moses Nyirenda, MANA

Minister of Information, Gospel Kazako says government is concerned with the increase of fuel prices in the country but it was inevitable since this is the current global trend and the challenge had to be addressed that way.

Kazako said this on Tuesday in Lilongwe at a media briefing which his Ministry jointly organized with Malawi Energy Regulatory Authority (MERA), saying government could not manage to control the fuel prices.

“The fuel price hike is something which we are concerned with as government. This challenge is a global trend — the fuel price increase is not government’s fault, it is beyond government’s control,” he said.

He added that fuel price increase is not something new in Malawi’s history and he advised service providers that use fuel not to abuse their clients due to the fuel hike.

“We are calling upon those that use fuel as a raw material, including transporters, not to take advantage of fuel hike to abuse the people who use their services.

“Currently, we have heard the news that some minibus operators have raised fares up to 50%, which is too much comparing to how fuel prices have been raised,” he said.

Petrol is selling at K1,150 per litre from K899.20,  representing a 27.89% increase; diesel at K1,120 per litre from K899.00 at an increase of 24.72% while paraffin is at K833.20 per litre from 719.60 at an increase of 15.79%.

In his remarks, MERA Chief Executive Officer, Henry Kachaje said the fuel price increase was made using Automatic Pricing Mechanism which was adopted in 2012 through which prices are adjusted when the change in the landed cost is beyond the negative or positive 5% trigger band.

He also said the current fuel price could not be further controlled since the Price Stabilization Fund was depleted, which is used to control fuel prices when it has been hiked globally.

The Law provides for a Price Stabilisation Fund (PSF) at 5% of in-bond landed cost (IBLC) in which prices are reviewed upwards if the change in IBLC is above 5% and downwards if it is below 5%.

When the change is below 5%, the difference is channeled into the Price Stabilisation Fund to cushion fuel prices should there be an increase within the -5% benchmark.

As at 7th September, 2021 the Price Stabilization Fund’s balances for petrol, diesel and paraffin averaged K1.5 billion against the recommended minimum of K5 billion.

Last month, when MERA was reviewing current trends of the international market and other economic factors, the Regulator had said since the determination of the pump prices in March 2021, the landed costs of petrol had increased by 20.44%, diesel by 12.03% and paraffin by 12.23%.

In the statement, MERA said key factors that affect the landed costs of petroleum prices are those that are determined by the international market and the exchange rate of the Malawi kwacha against major currencies.

Using Automatic Pricing Mechanism that involves global fuel pricing trends, MERA’s Liquid Fuels & Gas Pricing Advisory Committee meets on the first Tuesday of every month to review prices of liquid fuels and gas.

The Committee next submits its recommendations to the MERA Board and within 48 hours, the Board is supposed to make a resolution on the Committee’s recommendations, as provided in the Liquid Fuels and Gas (production and supply) Regulations, 2009.—Additional reporting by Duncan Mlanjira