THE Fair Competition Tribunal has
thrown out an appeal filed by 13 Oil Marketing Companies (OMCs) opposing
the Energy and Water Utilities Regulatory Authority (Ewura) new oil
pricing formula of 2011.
The companies also appealed against
EWURA's compliance orders to four OMCS namely BP Tanzania, Engen
Petroleum Tanzania Ltd, Camel Oil (T) Ltd and Oilcom (T) Ltd.
In its judgment, the Tribunal, under its
chairperson, Judge Razia Sheikh, ruled that the appeal was devoid of
any merit and was thereby dismissed in its entirety with costs.The
judgment has put to rest a heated legal battle between the regulator and
OMCs as the new formula last year precipitated an artificial shortage
of oil, which was critical.
Among other things, the new formula
removed 7.5 per cent buffer zone which OMCs were formerly (in 2009 formula)
allowed for the purpose of taking care of uncertainties.It also
decreased transit/ocean losses from 0.5 per cent for petrol to 0.25 per cent and from
0.30per cent for diesel and kerosene to 0.15 per cent of cost, insurance and freight
(CIF) value.
The appellants, represented by IMMA
Advocates, complained that Ewura erred in law by failing to take into
account relevant and international benchmarks for prices, costs and
return on assets in comparable industries."The respondent (Ewura) erred
in law and in fact by issuing a price formula that is so low that it
leaves no room for competition between the appellants thus amounting to
forcing the appellants into an arrangement tantamount to price fixing,"
reads the appeal.
The appellants also claimed that Ewura
failed to take into account the consumer and investor interests; did not
protect the financial viability of the appellants and failed to promote
effective competition and economic efficiency.
"The respondent erred in
law and in fact by ordering the 1st, 2nd, 3rd and 4th appellants by
virtue of issuing them with compliance orders to sell petroleum fuel at a
loss", claimed the appellants.
Generally the OMCs claimed that Ewura's
decision contravened its duties and obligations under the Ewura Act and
that the formula was arrived at as a result of political manipulation
and pressure.
Represented by GRK Advocates led by Zephrine Galeba, the
respondent defended that the formula had taken into consideration the
views collected/availed from/by all stakeholders including the
appellants and other members of the public.
"…in determining the pricing formula,
the respondent had fully complied with all the relevant statutory
provisions and further that the respondent had taken into account all
the factors required by the law which were exhaustively discussed during
the inquiry", Ewura responded.
Regarding compliance orders, Respondent
maintained that it had not ordered OMCs to sell at a loss."It (Ewura)
had merely ordered the four appellants to desist from their unlawful
conduct of refusing to sell/supply petroleum products in accordance with
the new cap prices and resume their operations," the respondent
maintained.
Making the judgement, the Tribunal ruled
that the respondent had properly exercised its power as a regulator
when setting the new formula."The argument about financial viability (by
appellants) is vague, misleading and misconceived since the appellants
have not shown how the respondent could have taken this into account,"
the Tribunal ruled further.
The Tribunal stated that in arriving at
the new formula, the respondent had considered all the factors including
the consumer and investor interest, the costs of supplying petroleum
products, the relevant benchmarks and other factors provided in sections
6 and 17 of Ewura Act.
"In the circumstances, for the above
reasons, we're satisfied that the respondent cannot be faulted for
issuing the compliance orders since it is undisputed that the four
appellants had refused to comply with Ewura's decision", the Tribunal
decided.The new formula also decreased financing charges from 1.75 percent CFI
value to 0.25 per cent CIF value and pegged the exchange rates to those of the
Bank of Tanzania.
Source: The Daily News,http://dailynews.co.tz
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