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PPPRA explains rise in subsidy payment



Executive Secretary, Petroleum Products Pricing Regulatory Agency, Farouk Ahmed

•Denies Alison-Madueke’s interference
•IPMAN seeks transfer of depot chiefs

THE sharp rise in the amount of subsidy payment to marketers between 2011 and 2013 was as a result of price changes in international crude oil market, the Petroleum Products Pricing Regulatory Agency (PPPRA) has said.

A statement signed by Manager, Corporate Services of the PPPRA, Lanre Oladele, yesterday in Abuja also denied interference in its affairs by the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke.

Meanwhile, as fuel scarcity bites harder, the Independent Petroleum Marketers Association of Nigeria (IPMAN) has called on the Pipelines and Product Marketing Company (PPMC) to urgently transfer all depot managers who have stayed in a particular location for more than 10 years.

Oladele stressed that the cost elements like international crude and product prices fundamentally contributed to the fluctuations in the subsidy figure between 2009 and 2013.

He added: “In 2009 when annual average landing cost of PMS was N78.19 per litre and pump price was N65.00 per litre, the annual average subsidy gap was N26.39 per litre. However, when compared to the annual average landing cost of N130.29 per litre in 2011 and the pump price of N65.00 per litre, the annual average subsidy gap swung to N79.63 per litre.”

He said the huge differential in the subsidy was also influenced by the movement of the figure from N26.39kobo in 2009 to N79.63 per litre that was recorded in 2011. He was quick to also add that this figure included kerosene subsidy arrears of 2010 and parts of 2009.

He added that one of the fundamentals that affected the subsidy regime was the decision by the PPPRA Board in 2010 to amend the Petroleum Stablisation Fund (PSF) guidelines, which enabled the participation of more indigenous operators in line with the Local Content Act.

Oladele explained that this action, which, is in line with the Board’s statutory powers of running the affairs of the Agency, brought the number of participants to 142. Although the reason for the PPPRA Board’s amendment of the guidelines was well intended, it inadvertently created opportunities for abuse of the subsidy process by some unscrupulous marketers.

“Furthermore, with regards to the reduction in subsidy paid out in 2013, it is important to note that while the annual average landing cost in 2013 increased to N131 per litre, the annual average subsidy gap dropped from N79.63 per litre in 2011 to N50 per litre in 2013 due to reduction in subsidy level by N32 arising from the increase in pump price from N65 per litre to N97 per litre in January 2012,” he said.

He added that the some reforms introduced by Mrs. Alison-Madueke in 2011 eventually led to the sharp reduction in the figure.

He explained: “The objectives of the reforms were to ensure greater transparency, accountability, effectiveness and efficiency, as well as good governance, consistent with international best practices.

These reform measures include among others, introduction of Certified Cargo Inspectors at all discharge facilities; tightening requirements for imports documents; taking physical control of discharge valves at Depots to eliminate risks of back-loading malpractices; rejection of ‘homogenized cargo’ to eliminate risks of round-tripping.

Others are, “ensuring all discharges are accompanied by a complete ‘Family Tree’ to eliminate round-tripping; deployment of Lloyd’s List Intelligence Sea Searcher ® Services, for tracking vessel movements around the world to determine the true origin of cargoes; as well as introduction of delivery Lay cans to ensure budget compliance.”

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