MERA justifies fuel price hike

Petrol attendant at work

The Malawi Energy Regulatory Authority (MERA) has justified the increase in fuel price despite a decrease of the commodity on global scene, saying the pricing mechanism the country uses means the global drop will be reflected at next month's review.

The energy regulatory body on Thursday increased the price of petrol, diesel, and paraffin by 6.2 percent, 5.86 percent and 3.93 percent, respectively.

This means consumers will be paying K990.30 for petrol, a jump from K935.60, while diesel will be bought at K990.40 from K935.60. Paraffin, mostly used in rural areas for lighting lamps, will be selling at K785.00 from K755.30 per litre.

This is the third time in under six months that MERA has increased the price of fuel, pushing basic commodity prices up in the country where food prices have already been on an upward spiral.

Fares for minibuses, a common means of commute for a majority of urban dwellers, are also likely to go up, driving further the cost of living.

MERA adopted an automatic fuel pricing, but the instability of the local currency has led officials, in some circumstance, to hold the rise.

But, although the price of oil has gone down globally, leading to most countries reducing the price of the essential commodity, officials in Malawi say the current price hike reflects trends in the previous months.

“There are many factors why we have the increase the biggest being the interaction on the international market as Malawi does not produce its own fuel,” said Collins Magalasi, chief executive officer at MERA.

Added Magalasi: “At the time we were buying the current stock, it was 13 percent higher and now people have to pay for that increase. You have to understand that fuel takes some time to reach Malawi.”

Magalasi said that the MERA board meets every month to review the prices and that the current drop in oil price was only announced last week, meaning they will put that into consideration during next month’s review. This is different from other countries, said Magalasi, who adjust their prices as and if.

“When we meet again as usual, we will consider the current global fuel reduction. It takes a month to have an adjustment as our formula is a month-minus-one hence the current reduction cannot reflect now.”

However, apart from costs of freight on board (FOB), the exchange rate of the Malawi Kwacha to the US Dollar, as well as "changes in local factors that determine the maximum fuel prices", MERA board also considered wholesale margins for oil marketing companies to maintain their sustainability, according to the press statement.

Commenting on this, journalist and business communicator, Thom Khanje, posting on Facebook, described the justification as ‘insensitive and unacceptable’, saying most Malawians are going through hardships such as prolonged power blackouts.

“The issue of profit margins for fuel companies and filling stations could have been considered at another time when changing them would have had no upward impact on consumer prices,” wrote Khanje.

However,Magalasi said the current global reduction will assist the country to have stable and sustainable fuel availability.