Mera banks on new fuel pricing regime

The Malawi Energy Regulatory Authority (Mera) has said the adoption of an automatic pricing mechanism (APM) will help mitigate the accumulation of losses incurred by fuel importers.

Under the new fuel pricing regime, fuel pump prices will be adjusted to reflect fuel price movements on the international market to allow fuel importing companies to recover importation costs on real time basis.

The pricing system will link pump prices to procurement costs and exchange rate movements with a plus-minus 5 percent of trigger band.

Pump price adjustments, according to the new pricing system, will, therefore, reflect the changes in the value of In Bond Landed Cost (IBLC) of petroleum products and movements of the kwacha against the dollar. 

“It is the expectation of Mera that the implementation of the APM will bring about the confidence to all importers through the assurance of full recovery of importation costs which in turn will help to ensure a seamless supply of fuel products in the country,” said Mera chairperson Lyton Zinyemba on Sunday.

Zinyemba said the measure is intended to encourage fuel importing companies to import petroleum products to meet the demand based on market shares and the mandatory stock holding requirements.

He said to minimise the impact of frequent fuel price fluctuations on the international market, APM is set to operate within a specified threshold.

This means that any change in IBLC of more than 5 percent threshold will trigger a price adjustment. 

Meanwhile, Mera has put in place measures to support the new fuel pricing regime.

Finance Minister Dr. Ken Lipenga told Business News in Lilongwe that as part of economic reforms, government has introduced automaticity in fuel pricing as well as adjusting the electricity tariffs.

“The new energy price structure actually embodies in it social support policy for vulnerable sections of our society. Notice that if fuel were to be adjusted by the full impact of the devaluation, new pump prices for diesel and petrol would have been about K100 higher than those announced,” said Lipenga.