Tanzania: EWURA in a Bid to Reduce Fuel Importation Costs

Photo: Trygve Bolstad/UN

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ENERGY and Water Regulatory Authority (EWURA) has tabled a financing mechanism proposal on imported petroleum products for stakeholders to deliberate on, saying if approved, the new arrangement will greatly reduce the cost of importing fuel.


Ewura Director General Mr Felix Ngalamlagosi, at a meeting with stakeholders, mainly representatives from commercial banks, Bank of Tanzania, Petroleum Importation Coordinating Limited and Government Consultative Council, in Dar es Salaam, said:
"The proposal aims at improving the system in two things, one being reducing the number of days the ship has to stay at the dock which at present is two to four days and secondly is to reduce the financing cost which is one per cent at present."
Before a ship is emptied, it has to provide a Letter of Credit (LC), which confirms that it is paid for, but if one of the importer delays to provide the LC then the ship will have to wait until it is brought, causing a delay of two to four days, something that the proposal wants to reduce, he said.
The EWURA boss added that the current financing mechanism has a fixed cost of one per cent of Cost, Insurance and Freight (CIF), where the financing is done individually by opening the LC with their respective banks, the idea is to have one LC, with one bank in every shipment that is ordered so as to reduce the financing cost.
"The Bulk Procurement System (BPS) came to improve the system of importing Petroleum products, which has worked relatively well. For instance, a ship no longer stays for between 40 and 60 days at the dock; but for only two to four days," said Mr Ngalamlagosi.
However, Ewura feels it is the right time to review the financing cost and come up with alternative financing mechanism that would further reduce the costs of importation for the benefit of the consumer and the country, the EWURA boss remarked.
Moreover, he said, Ewura is now open to suggestions from stakeholders on how best to improve the system and make the idea work until early august, this year when they will sit with the stakeholders and decide on how best the system can work in Tanzania.
NMB Trade Finance Specialist Ms Wende Mengele described the EWURA proposal as a good idea but noted that since it was in its initial stage, "there is a lot that that has to be analysed for it to work."
Ms Mengele added that if the idea will work then everyone -- from the commercial banks to individual consumers -- will benefit. "But a lot remains to be done before the idea works," Ms Mengele observed.
Speaking at the meeting, the Assistant Manager of International Economics and Trade Department at the Bank of Tanzania (BoT), Mr Festo Mlele, said that they have been part and parcel of the idea and are looking forward for the collected critics and comments and create an improved workable plan in the end.