Importers of petroleum products are stuck with millions of litres of fuel following the decline in national demand on account of the COVID-19 lockdown.
The lockdown has paralysed transport and industrial production leaving importers struggling with extra charges incurred in transport and packing fees.
“Importers ordered for this fuel about two months before COVID-19. By the time it got here, the lockdown had already been imposed. This means that the storage facilities are full because consumption levels have since dropped by 80 percent,” Joseph Akumuntu, the Executive Secretary of the Rwanda Association of Petroleum Products Importers, told The New Times in a telephone interview.
Akumuntu says that agreements between importers and transport companies stipulate that the former is charged $100 demurrage fee per day.
A demurrage fee is a charge payable to the owner of a rented truck upon failure to load or discharge it within the agreed time.
Proposed solutions
Akumuntu says that they are negotiating with the Government for tax concessions that will allow them to offload the fuel in private storage facilities.
Before the COVID-19 crisis, importers used to offload fuel in designated storage facilities, within which a Rwanda Revenue Authority office is located.
There are four fuel storage facilities in the country located in Kabuye, Rusororo, Jabana and Gatsata.
In these facilities, the importers are allowed the flexibility to pay taxes every time they collect fuel for distribution around the country’s petrol stations and factories.
This will, however, be subject to change if the importers offload the fuel in private facilities.
They will be required to pay taxes for the entire lot before offloading.
“Some of us have facilities where we can offload this fuel but we cannot afford to pay the full tax right away. We are hoping to discuss with the Ministry of trade and come up with a solution that will cut on the losses we are incurring right now,” he said.
A source familiar with petroleum business told The New Times that the Government was hesitant to allow this due to the fears that recovering this money could be tasking.
However, the Minister of Trade, Soraya Hakuziyaremye, says that the Government is weighing possible options of how best to fix the challenges.
“It’s true that they have contacted us. We are dealing with people who have nowhere to offload this fuel and considering giving them tax concessions so that they can take this fuel to their petrol stations and then we can revisit this when activities actively reopen,” she said.
Current status
As of today, 165 trucks carrying fuel are stuck on different roadsides in the country.
Each truck’s capacity is estimated at 40,000 litres. In simple terms, this implies that these trucks are collectively carrying an estimated 6.6 million litres of fuel.
Since the outbreak of the virus, prices of petroleum products on the international market have slumped by 80 per cent owing to the decline in demand.
Industry observers suggest that the Government should consider slashing fuel pump prices.
Efforts to contact Rwanda Utilities Regulatory Agency (RURA) were fruitless but a source within the institution who preferred anonymity said that considerations were being made over a 60 day grace period request made by industry players to allow them to sell the pre-existing stock.
RURA has previously maintained that a tariff cut will only reflect in costs of petroleum products being purchased on the current crude oil rates, which normally take between two and three months to reflect in the local market.
Before the COVID-19 lockdown, Rwanda used to consume 20 million litres of diesel per month, according to official data .
That amount is estimated to have fallen to a paltry 7 million this month.
The sales of Premium Motor Spirit (PMS), a term used to describe fuel that is used in cars have also been hit, dropping from 20 million litres in January to an estimated 5 million litres this month.
International oil prices have slumped as the pandemic spread across the world, infecting over 2.9 million and killing more than 200,000 people, crashing financial markets and triggering what is expected to be the worst economic meltdown since the Great Depression of the 1930s.
On the local market fuel pump prices are still at Rwf1,088 and Rwf1,073 for petrol and diesel respectively.
The price was set in March. Pump prices undergo a review every two months.
Statistics from the Ministry of Trade indicate that the annual petroleum consumption has grown from 360,000 cubic metres in 2016 to more than 600,000 cubic metres.
RURA’s 2018/19 annual report attributes an increase in imports for petroleum products largely to the growth of demand of fuel used in transport, the rapid expansion of RwandAir as well as high demand of heavy fuel oil in thermal plants for electrical generation.
The current level of demand is expected to require 198 million litres in reserves by 2024.
Source: New Times
