MERA set to announce fuel price increase

* The landed costs of petrol has increased by 20.44%, diesel by 12.03% and paraffin by 12.23%

* Landed costs of petroleum prices are determined by the international market and the exchange rate

* As at September 7, 2021 the Price Stabilization Fund averaged K1.5 billion against the recommended minimum of K5 billion

By Duncan Mlanjira

Malawi Energy Regulatory Authority (MERA) has announced that it is reviewing current trends of the international market and other economic factors to determine possible increase of petroleum products following the increase on landed cost of petrol, diesel and paraffin.

In a statement issued on Tuesday, MERA says since the determination of the current pump prices in March 2021, the landed costs of petrol has increased by 20.44%, diesel by 12.03% and paraffin by 12.23%.

But the landed cost of aviation fuel (Jet A1) has reduced by an average of 1.38% when compared to last review done in July 2021.

The Regulator says the 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.

MERA reserves funds to cushion pump prices under the Price Stabilization Fund but “as at 7th September, 2021, this Fund’s balances for petrol, diesel and paraffin average K1.5 billion against the recommended minimum of K5 billion.

MERA reiterates that under the Automatic Pricing Mechanism, which was adopted in 2012, the prices are adjusted when the change in the landed cost is beyond the plus or minus 5% trigger band.

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.

MERA applies the Automatic Pricing Mechanism in setting the maximum retail prices for liquid fuels and gas prices, as according to the law.

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.

Thus MERA says in the statement that the “outcome of the energy price reviews will be communicated in due course”.