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The Petroleum Pricing Committee has recommended to government that the pump price of diesel be increased from K95.40 to K101.42 per litre and paraffin to K84.68 from K74.45 per litre, a development which analysts say if effected would severely hit the poor especially in the villages.
Committee minutes dated December 1, 2004 on the review of pump prices sourced by the Nation Online say the increase in prices of petroleum products on the world market has resulted in changes on the in-bond landed costs (IBLCs) for petrol, diesel and paraffin into Malawi.
“The IBLC changes for all products are beyond the 5 percent band and consequently qualify the products for pump price revision ... In line with the Automatic Pricing Mechanism, we are recommending the following pump prices: diesel to cost K101.42 and paraffin K84.68,” read the minutes.
Five per cent is the automatic pricing band adopted by government and the IMF to either increase or reduce fuel prices based on the trends in world oil prices or against the strength of the kwacha to the US dollar.
But if government bows to pressure to hike the price in the next two weeks, say analysts, the hardest hit will be the poor in the villages, because this would trigger higher prices for commodities and force government to look for extra-budgetary resources.
Interviews with a family in Wisiki Village, near Bangwe, in Blantyre rural revealed that most families are failing to make ends meet just with the current prices of fuel.
Mai Wisiki, a housewife with eight orphans and an aged mother to look after, said another increase will leave her with no food for days on end.
“Just today [Tuesday], I bought a bucket of maize at K580. I will spend K35 at the mill to make the maize into flour and this will only last me and my family a week or less,” she said.
Her husband, Village Headman Nankwawa, does not mince words either:
“Cama [Consumer Association of Malawi] and government are there to protect us the poor and they should not allow another increase because already we are failing to survive.
“Right now I am still waiting for free fertilizer as promised. I cannot afford a bag of maize at K20 per kg; I only buy K10 worth of paraffin which lasts me a night; and firewood is no longer affordable at K500 per pile. It’s tough,” he said.
Aliseni Wisiki, the chief’s brother-in-law, cannot understand why fuel has to go up every now and then. “Why is it that during Dr. Banda’s days this never used to happen. Why now?”
Cama Executive Secretary John Kapito, who also sits on the pricing committee, said on Wednesday his position is to make sure that the price of fuel is not increased because it would hurt the poor and defeat the whole concept of poverty alleviation.
“This is the reason why we have the two levies —PSF (Price Stabilisation Fund) and the IBLC which is being used to offset accumulated trading losses incurred by the oil companies,” he said.
According to the committee, oil companies in October alone lost K14 million because of government delays to increase recommended fuel prices.
Chairman of the committee Chancellor Kaferapanjira while admitting that government has good intentions by declining to increase fuel, said the delays will just prolong the problem.
“This is a complete mess of what is supposed to be done and what this means is that we will still continue to increase the price of fuel even when prices on the international market drop,” he said.
Kaferapanjira said the role of his committee is to analyse the global trends and the performance of the kwacha against the dollar “and on that basis, make recommendations to government.”
Spokesperson for Malawi Economic Justice Network Perks Ligoya feared that the continued delays in hiking the price of fuel “posses a great danger to the country’s economy because it would be inflationary.”
But government this week failed to respond to questions on whether they will abandon the pricing mechanism.
Secretary to the Treasury Milton Kutengule, who sits on the committee, declined to comment on the issue and referred the Nation Online to Thause Odalla, Secretary for Energy and Mining.
Odalla could not be reached for comment as well.
This is the second time in the first week of December alone for the committee to meet and propose new prices.
During the December 1 meeting, according to minutes as of November 29, petrol, diesel and paraffin had gone up by 28.12 percent, 47.75 percent and 56.36 percent respectively, more than the 5 percent benchmark.
On December 7, 2004, the committee met again where another revision was agreed upon, this time on diesel and paraffin only, the two most consumed commodities in the country.
As we went to press, the oil producing countries (Opec) were meeting to discuss cutting production to stop the fall in prices that have been noticed the past week.
According to CNN Friday, the meeting will mean a rise in international prices of crude oil.
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