Consumers speak on looming fuel hike

Consumers Association of Malawi (Cama) says the looming price hike as hinted by the Malawi Energy Regulatory Authority (Mera) , though expected, is a cause for consumers who will have to part with their incomes.

Cama executive director John Kapito was reacting to a statement by Mera in which the energy regulator has indicated it will consider the changes in landed costs and other economic factors to establish appropriate prices of the petroleum whose outcome will give direction of fuel prices.  

Kapito said in a written response on Wednesday said as all parameters point to a possible increase, a price increase in fuel is inevitable.

“This is a dark period for consumers. We can not run away from these sad economic realities. We have an economy that is completely broke and under pressure,” he said.

In a published statement on Wednesday Mera indicated that key factors that affect landed costs of petroleum products are are the Free on Board (FOB) prices of refined petroleum products on the international market and the exchange rate of the Kwacha against the dollar.

“Since the determination of the ruling pump prices in October 2021, the Kwacha has slightly depreciated against the dollar by 0.12 percent, from an average of K823.49 to a dollar to the current average of K824.48 to the dollar.

“On the other hand, FOB prices of Petrol, Diesel and Paraffin have increased by 7.15 percent, 14.87 percent and 15.99 percent respectively,” said the statement.

Mera has also indicated that the Price Stabilisation Fund (PSF) balances for Petrol, Diesel and Paraffin averaged K0.9 billion against the recommended minimum of K5 billion at the beginning of the month.

The energy regulator added that under the Automatic Pricing Mechanism, which was adopted in 2012, prices are also adjusted when the change in the landed cost is beyond the plus or minus five percent trigger band. 

Mera has since indicated that it will consider changes in landed costs, the PSF status, the need to enable importing companies to recover importation costs and the goal of promoting consumers’ interests with respect to fuel prices and continuity of supply.

In an interview on the direction of pump prices Mera consumer affairs and public relations manager Fitina Khonje pleaded for patience stating that a review on the factors will give direction of the pump prices.

 In the just ended year, the kwacha has been volatile, losing ground to all major trading currencies including the dollar trading, a development which necessitated an increase in pump prices last effected in October 2021.

Last month Mera maintained pump prices after an assessment of the effect of the movement of Free-On-Board prices, the exchange rate of Malawi Kwacha against major trading currencies and changes in local factors.

Currently, Petrol remains at K1150.00, diesel at K1120.00 and kerosene at K833.20.

Fuel prices have a knock-on effect on the cost of transport, goods and services, which in the long-run impact inflation.