21 Nov 2018

Government debt to oil companies has increased from over P98 million to in excess of P1 billion between January and October this year and is growing at a rate of P126 million per month.

The rate is way higher than the National Petrolium Fund (NPF) levy collection of P13.5 million per month hence the fund cannot cope to raise revenue required to clear the debt, Minister of Mineral Resources, Green Technology and Energy Security Mr Eric Molale told the media on November 20.

He the situation was not good for the economy as it had a negative effect on the operations of local oil companies and exposed the country to the risk of fuel supply interruptions.

The debt and non-payment of oil companies generally, Mr Molale said, had a ripple effect such as potential for retrenchment for oil operation employees and other undesirable effects.

Mr Molale explained that NPF was established to control the level of adjustment required on the retail pump prices and products to cushion customers from upward adjustment depending on the magnitude of adjustments and the balance of the fund.

He said there were cases when the magnitude of the required adjustments got too high to be covered through price cushioning by the NPF.

The minister said the fund was currently not coping with its payment obligations due to amongst other reasons, the length of time taken without adjusting the current levy rate of 13.5 thebe per litre set in December 2014.

He said there was therefore need to adjust retail pump prices accordingly although it was equally recognised that the existing price adjustment backlog would not instantly clear the price deficit and government debt to oil companies.

Minister Molale said the average price that the local consumers had been paying for all petrol grades had been lower than the actual cost by more than P1.70 per litre and P2.25 per litre for diesel grades.

He noted that crude oil prices increased from P620.87 to P800.63 per barrel between January  and  October which translated into 25.25 per cent on average.

During the period, the minister said, retail pump price under recoveries for petrol grades increased from an average of 78.69 to 146.33 thebe per litre while diesel prices increased from 124.78 to 225.98 per litre representing an average increase of 85.53 per cent.

“In spite of the continuous increase in the international crude oil and finished product prices, the frequency of increase of domestic prices has been done very rarely compared to other countries and the rest of the world,” he said.   

Minister Molale said government would continue to monitor and regulate the retail pump prices of petroleum products.

He further explained that the retail pump prices of all petrol grades, diesel grades and paraffin were reviewed on a monthly basis to determine the need for adjustment in order to align them with market prices.

In this regard, a pricing slate showing all the product cost components and other charges as well as the slate unit price position was produced a month in arrears, he said. ENDS