27 May 2014

Tanzania: Bulk Fuel Procurement System Seen Transparent, Efficient

THE latest winner of Bulk Procurement System (BPS) to supply petroleum products for the month of June this year was Gapco Kenya Limited.

It was the 22nd edition of awarding the BPS tender to a winning bidder since the exercise started in 2012. "BPS is the most transparent way of public procurement where the winning bidder is decided in the open before representatives of all bidders, everyone endorses the winning bidder," said former Energy and Water Utilities Regulatory Authority (Ewura) Director General, Haruna Masebu.

Mr Masebu who championed the establishment of BPS over two years ago amidst strong resistance from oil marketing companies, retired having left a system which both consumers and suppliers are happy with.

The BPS was introduced in mid 2012 as a way of ending cheating by most of the oil marketing companies which denied the government revenue but forced consumers to pay more for the commodity.

"BPS has brought sanity to the oil trading business which is important to the economy," said Augusta Energy Country Manager, Orlando D'costa.

Mr D'costa whose company won the tender three times in a row last year noted that transparency in the entire process has lowered pump prices for fuel, increased government revenue and restored some professionalism.

With the transparent manner in which the winning bidder is picked, there has been very little complaints raised so far. "At the beginning, we used to have complaints because the system was still new but now, people are satisfied with the process," said Petroleum Importation Coordinator (PIC) General Manager, Michael Mjinja.

Mr Mjinja pointed out that after almost two years of the BPS process, oil marketing companies are accepting decisions made openly and unanimously in picking the winning bidder.

"It's all done in the open, this gives people very little room for manouvre which often causes complaints," Mjinja noted. The BPS process is governed by Petroleum Act Cap 392, Petroleum (Bulk Procurement) Regulation, 2013 (G.N. No. 59 of 2013) and the Petroleum (Bulk Procurement) System Implementation Manual.

Apart from transparency and increasing government revenue, the BPS has also assisted the country save foreign currency used to purchase petroleum products.

According to Ewura statistics, the prices have dropped from 71.46 US dollars per metric tonne to about 37.33 US dollar in the 13th tender compared to the seventh tender held last year.

"At 18-month, the BPS has proved effective in reducing prices for fuel which was one of the major causes of hiked pump prices," said Ewura's Corporate Communications Manager, Titus Kaguo when the system clocked a year and a half end last year.

The import bill also fell dramatically enabling the government save vital foreign currency while curbing smuggling hence taming revenue loss. Ewura records show that when the system was introduced in mid 2012, a record 412,712,795 metric tons of petroleum products were imported compared to 382,261,877 metric tons during the same period in 2011.

"This simply implies that government revenue has increased and smuggling controlled under BPS," pointed out Masebu. The system has also helped lower pump prices on average because oil marketing companies have no longer the liberty to choose their own suppliers hence charge pump prices accordingly.

"On average pump prices are also falling in line with world market prices," said Tanzania Truck Owners Association (TATOA) spokesman, Elias Lukumay.

Mr Lukumay whose association has perhaps the largest single group of fuel consumers, said although BPS is still facing problems, a lot of positives have been accomplished.

Prior to BPS introduction, a few major oil marketing companies used to control over 80 per cent of the domestic market through importation of 90,000 metric tons of petroleum products monthly earning on average 100 million US dollars (over 160bn/-) in profits.

Tanzania consumes about 1.54 million cubic metres per annum of petroleum products wholly imported from Mediterranean, Arabian Gulf and sometimes from Durban, South Africa, according to Ewura which makes the sector one of the most lucrative in the economy.

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