BPS saves over 1tri/- in premiums, demurrage charges

DAR ES SALAAM: INTRODUCTION of the bulk procurement system (BPS) in the importation of petroleum products has enabled the country to save 1tri/- in premiums, demurrage charges and evaporation losses per year.

In strengthening reliable access of petroleum, the Tanzania Ports Authority (TPA) is expected to ink an agreement with a contractor on the improvement of infrastructure at the Dar es Salaam Port, a move aimed at obtaining a single receiving terminal operator.

The Executive Director (ED) of the Petroleum Bulk Procurement Agency (PBPA), Mr Erasto Simon, revealed this while presenting the agency’s implementation report to editors and journalists in Dar es Salaam, yesterday.

“BPS has proved effective in price reduction of petroleum products by providing a relief on premium due to economies of scale, saving up to 200 million US dollars (around 500bn/-),” said Mr Simon.

On the other hand, he said the system has helped to reduce the huge congestion of vessels at the port waiting to unload fuel since each oil marketing company (OMCs) imported products according to their own capacities.

“On average, up to 170 million US dollars (about 425bn/-) is being saved on demurrage charges every year,” stated the ED, indicating that formerly several vessels with small consignments piled up and spent between 45 and 60 days waiting for a window to unload fuel.

Currently, under BPS all requirements are consolidated together and assigned to vessels of economic size, which has reduced the number of waiting days to an average of five (5) days.

Expounding further, the ED noted that the system has helped to reduce the loss of petroleum during offloading at an average of 1,100 tonnes (equivalent to 1,300,000 litres) amounting to 4.16bn/- per month, a threshold price recorded as of December 2023.

He added: “Every year around 49.9bn/- is being saved due to the establishment of the system.”

Generally, he said, BPS has enabled the government to control the arbitrary increase in prices of petroleum products, whereby formerly traders used to hike fuel prices regardless of actual world market prices.

As such, controlling the fuel prices has significantly contributed to government endeavours to control inflation as it directly affects the prices of most products and services.

“Overall, the availability of petroleum products in the country has been relatively good and has been stable for the entire period since establishment of the system.

“Fuel supply in the country has always been above projected levels and meeting required quality standards,” he said, expressing the government commitment to continue ensuring stability of BPS for the security of supply of petroleum products in the country.

On the other hand, reliability of BPS has contributed to the increase in tax revenue from oil products and on-transit fuel reaching approximately 55 per cent from the earlier 45 per cent of total imported petroleum products.

He noted that neighbouring countries of Uganda, Rwanda, Burundi, the Democratic Republic of Congo (DRC), Zambia and Malawi have continued to receive part of their fuel through Tanzania ports and thus increase the country’s income.

Aside from the benefits, the ED outlined a number of challenges including the increase in the amount of fuel being ordered that does not match the capacity of the receiving infrastructure.

He said the existing infrastructure has been in use since the beginning of BPS when the amount of oil that was being imported per month averaged at 200,000 to 250,000 tonnes. Currently, the amount of oil imported per month is an average of 450,000 – 600,000 tonnes.

Equally, the ongoing war between Russia and Ukraine has caused the price of oil (FOB) and the cost of delivering it to the country (premium) to increase significantly. This situation has caused a greater demand for US dollars than the available capacity and led to a large amount of oil being in financial hold, causing the cost of importing oil to increase.

To mitigate the challenges, he said the agency in collaboration with the Ministry of Energy and Ministry of Finance and  Bank of Tanzania (BoT) is working to reduce the dollar shortage, whereby various measures have been taken.

On top of all, he noted efforts taken by the government to strengthen accessibility of petroleum products including issuance of subsidies to control price increase between July and December 2022 among other critical measures.

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