National Petroleum Fund "running on empty"

MBONGENI MGUNI
Staff Writer | Friday June 28, 2013 00:00

Energy Affairs Department officials revealed that while the fund had 'improved slightly' due to the easing of fuel prices in recent months, it was still below the state required to conduct its mandate. The latest revelations come as local fuel retailers warn that the positive fuel price environment, known as over-recovery, of the last few months is ending, bringing the possibility of sharp increases.Last week retailers told BusinessWeek that the Pula's gradual decline against the US dollar since last year was piling pressure on the department's formulas, while the threadbare NPF would be unable to absorb the necessary increases.

'During the prolonged period of under recovery, retail prices were not adjusted upwards and this negatively affected the state of the NPF as it continued to cushion prices although it was already under pressure due to the accumulated debt to oil companies,' the department said in  response to BusinessWeek enquiries.'The NPF balance is still not at a desirable state considering the amount of debt to oil companies, and the mandate it has'.Retailers last week estimated that the department owed them up to P200 million in cumulative subsidy costs stretching as far back as last June. The subsidy costs were incurred due to real fuel prices and associated costs being higher than the pump price formula government hands down to retailers. Department officials said the fuel sector had been experiencing 'over-recoveries' since May with the financial benefits of these being passed on to fuel retailers to cover the accumulated debt.

Last week, fuel sector insiders revealed that the local economy could have received a fuel price reduction had government not owed the 'accumulated debt'.'The current over recoveries are very important as they are assisting in reducing the negative cumulative slate balance,' the department said.' Both petrol and diesel have been slightly over recovering for the past three months, with paraffin still under recovering. Notwithstanding, the industry has experienced long periods of under-recoveries for several months.' Energy Affairs officials said pump price adjustments depended on the state of the NPF, the fuel sector's state of under or over recovery and how much the government and oil companies owe each other.