Daily Champion (Lagos)
Sopuruchi Onwuka
20 October 2009
The federal government appears to have concluded plans to go on with subsidy withdrawal, with the importation yesterday, of 128 cargoes of refined petroleum products comprising diesel, petrol and kerosene.
This is even as the Department of Petroleum Resources (DPR), at a meeting in Lagos yesterday, placed petroleum marketers in the country on notice, informing them that the controversial market liberalization was imminent.
Although government has denied the November 1 deadline, the Organised Private Sector (OPS) and labour unions have continued to kick against the planned deregulation of the down stream oil sector saying such moves will aggravate the suffering of the masses.
But in preparation for the implementation, government has engaged in massive importation of petrol and kerosene to muster enough stock to keep the market and to ensure that the fiscal transition does not create supply gaps.
The development comes as independent marketers have disagreed with the strategies adopted in transiting from market price control to commercial liberalization, warning that continued involvement of the Nigerian National Petroleum Corporation (NNPC) would cause price distortions and supply disruptions.
Director of DPR, Mr. Billy Agha, who addressed the marketers, said deregulation of the downstream petroleum sector was imminent, adding that the measure would create an environment conducive for perfect competition.
He said the enthronement of deregulation policy would remove obstacles that stunted the growth of the sector and introduce remarkable improvement in availability of fuel in the country.
Agha told the marketers to start installing measures for efficient supply and distribution of products to avoid scarcity and associated vices when the petroleum subsidy was finally withdrawn.
He said government was pressing on with the imminent deregulation of the market and enjoined markers to cooperate in ensuring smooth transition of the process.
"It is my intention to inform you of government's concerted efforts to ensure availability of petroleum products during this critical period, and the need to proactively identify and check-mate any obstacle that may lead to supply distortion, and successful introduction of the impending deregulation regime," he said.
Although Agha refused to disclose the actual date of the deregulation, there are indications that the policy will come into effect next month.
Sources in the petroleum ministry told Daily Champion that a directive has been given to the Petroleum Products Pricing Regulatory Agency (PPPRA) to clear the backlog of subsidy claims owed markers before the end of the October while the NNPC was directed to place order for 90 cargoes of petrol, 28 cargoes of kerosene and 10 cargoes of diesel to cover the country's requirements well into 2010.
He said the Warri and Kaduna refineries which have been shut down due to crude feedstock constraints would be up in the last quarter of the year to assist in keeping the market turgid with products during the period.
Agha said the re-streaming of the refineries and massive importation of the transportation fuels were part of the strategic measures to ensure availability during the high demand yuletide period as well as bridge observed supply gaps in the markets following declining capacity of marketers to import products.
He deplored the failure of the marketers to keep to their commitment in augmenting supply to the market, saying the scarcity has already started creeping into the market ahead of deregulation.
"We are uncomfortable to observe from our records the sharp decline in the number of applications for permits to import PMS and DPK by major and independent marketers. It is our fear that in the event of not being able to flood the markets as anticipated during this critical period, the supply chain will be affected which may lead to scarcity, hoarding of products, diversion and other associated ills of scarcity.
"The DPR would not hesitate to impose the necessary sanctions on erring marketers found violating the laws. DPR is capable and will not spare any marketer who decides to jeopardize government's aspiration in ensuring products supply during the deregulation period," he said.
In their response, market leaders in the meeting flawed the modalities and strategies adopted in the deregulation process, arguing that uncertainties about the policy and state sponsored imports have made it difficult to take business decisions.
They condemned the continued involvement of NNPC in products supply to the market as a threat of monopoly, alleging that the huge debts owed them by the PPPRA impedes on their ability to compete in a liberalied environment.
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