Molale secures P71m to chip away at oil company debt
Mbongeni Mguni | Friday December 14, 2018 18:00
The Ministry plans to secure the funds by dipping into billions of pula allocated for subsidies towards the Botswana Power Corporation.
According to notes accompanying the 2018/19 supplementary budget, government’s debt to oil companies is rising by P35.6 million per month and the payment of P71.2 million would defer increases that were planned for December and January.
Members of Parliament were due to debate the supplementary budget before adjourning for Christmas today (Friday).
Late last month, energy security minister, Eric Molale revealed that government owes oil companies about P1.4 billion, even after payments amounting to P830 million sourced during the year by diverting funds from other projects and entities.
“We are going back to government to ask for more funding to make sure we pay the oil companies and I’m optimistic we will get it,” Molale said at the time.
The National Petroleum Fund (NPF), which, amongst other duties, collects levies from motorists and is supposed to support the subsidy by paying the oil companies, is on its knees. For every litre of fuel motorists pay for, 13.5 thebe is remitted by oil companies to the NPF raising hundreds of millions of pula annually, but the Fund only had P98 million as at March this year.
According to Molale, at the last count, the NPF had P76 million as a result of an extended period of pump prices being lower than the actual costs oil companies incur in bringing fuel to the country.
That situation, known as under-recovery, has persisted since December 2016 as international fuel prices have risen above the NPF’s ability to subsidise them, while a well-publicised legal case involving P230 million diverted from the Fund has also weakened the buffer.
According to the notes accompanying the supplementary budget, the under-recovery has been easing in recent months due to a decline in international brent oil prices. Diesel prices, however, have remained “stubbornly” strong, the notes read.
“Based on the current consumption of 100 million litres per month, there is a need to adjust the petroleum retail pump prices by 33, 36 and 31 thebe per litre on petrol, diesel and paraffin respectively in order to avoid further accumulation of the government debt by about P35.6 million per month to the local oil companies,” the notes read.
Last month, executives in the local oil sector told BusinessWeek that petrol should cost P1.47 more per litre and diesel P2.25 more than current prices.
The Botswana Energy Regulatory Authority (BERA) also recommended an across the board increment of P1.20 per litre. Government raised fuel pump prices by an average of 35thebe and warned further monthly increases were possible.
It is understood the deferment of the December and January fuel price increases are due to government’s desire to insulate the local agricultural sector which is kicking into high gear.