Malawi Energy Regulatory Authority (Mera) has maintained the pump price of fuel to cushion the impact of the increase in the landed cost of petrol beyond the plus or minus five-percent threshhold that influences price adjustments.
This means that fuel prices will be maintained at K723.60 ($1.3) per litre for petrol, K734.60 ($1.31) per litre for diesel and paraffin at K633.20 ($1.1) per litre, according to a Mera statement issued last evening.
Mera’s decision should come as a huge relief to motorists who were dreading a fuel price hike in the wake of a depreciating kwacha, which is currently trading at K570.67 to the dollar from K545 last month.
In the statement signed by Mera board chairperson Dingiswayo Jere, the price of diesel and paraffin qualified for an upward price increase, but Mera resolved to use the price stabilisation fund (PSF) to sustain the pump price.
Reads the statement in part: “The average Free on Board [FOB] prices of petrol, diesel and paraffin dropped significantly in the month of October, when compared to the ruling average FOB prices obtained in April on which current fuel pump prices are based.
“FOB prices of petrol, diesel and paraffin have declined by 22.01 percent, 17.98 percent and 17.43 percent respectively in October, attributed to continued over-supply of oil on the global market.”
But Mera contends that since the last review of the In Bond Landed Cost (IBLC) of petroleum products on May 5, the kwacha has depreciated by 26.37 percent against the dollar trading at K568.05 from K449.50 in May.
Mera said the combined effect of the movement of the FOB prices and exchange rate of the kwacha to the dollar resulted in the increase of the landed cost of petrol, diesel and paraffin by 2.72 percent, 6.79 percent and 6.32 percent respectively.
Under the Automatic Fuel Pricing Mechanism (APM), which Mera uses to adjust fuel pump prices, only diesel and paraffin triggered the five-percent limit for a price adjustment.
Some commentators have expressed fear that consumers may be sitting on a time bomb as the continued suppression of fuel prices could one turn ugly one day when the PSF is depleted. n