Judge throws out appeal on oil pricing

By The Citizen Reporter

Dar es Salaam, Tanzania. 

The Fair Competition Tribunal (FCT) has dismissed with costs an appeal by 13 oil marketing companies challenging the Energy and Water Utilities Regulatory Authority (Ewura) over a new pricing formula.

The ruling made by FCT Chair/Judge Ms Razia Sheikh on September 24, this year, noted that the appeal was dismissed because it was devoid of any merit. According to a copy of the ruling  obtained by The Citizen, costs for Ewura lawyers only exceed Sh100 million, and there are others that have not been specified.

Companies which had appealed the  new Ewura pricing formula are BP Tanzania Limited (which has since been sold), Engen Petroleum Tanzania Limited, Camel Oil Tanzania Limited, Oilcom Tanzania Limited, Total Tanzania Limited, Gapco Tanzania Limited and Hass Petroleum Tanzania Limited.

Others are Orxy Oil Company Limited, MSG International Tanzania Limited, GBP Tanzania Limited, Lake Oil Limited, Moil Tanzania Limited and Acer Petroleum Tanzania Limited.

In determining the appeal arising from the Ewura decision through public notice announcing new oil products pricing formula, Judge Sheikh was assisted by two other members, Mr Malima Bundala and Mr Ali Juma.

Among other issues, the appellants, who were represented by Ms Fatma Karume from IMMMA Advocates assisted by Ms Madina Chenge, argued before the tribunal that in changing the formula, which lead to the decrease of petroleum products prices, the respondent had erred in law and fact by failing to take into consideration the cost of supplying the products in the market.

They further argued that the respondent had  failed to take into consideration interests of the investors and consumers as well as returns in investments by the appellants.

They also disputed Ewura’s move, noting that the Authority had failed to take account of international benchmarks for prices, costs and returns of investment in the sector.

In general, the 13 appellants told the Tribunal that Ewura’s decision and action had failed to promote competition, something which might hurt the economy.

On its part, Ewura’s lawyer, one Zephrine Galeba, who was assisted by James Kabakama, all from G. R. K. Advocates,  maintained that the decision complained about could not be faulted because the Authority had taken all views by all stakeholders into consideration before arriving at the new pricing formula.

He also told the Tribunal that the appellants and other stakeholders were given adequate opportunity to discuss the proposals during an inquiry in which the appellants and other stakeholders took part.

But, in her decision, Judge Sheikh noted: “Going by the undisputed evidence we are satisfied that the appellants were afforded adequate opportunity to be heard during the whole inquiry process and indeed their objections to the cap prices effective August 3, 2011 were taken into account resulting to the amended notice of the cap prices effective August 6, 2011.”

Judge Sheikh also noted that the appeal had been thrown out because the appellants had failed to show the thrust of their assertion that Ewura’s  decision would cause them negative  financial implications.

“The argument about the financial viability is vague, misleading and misconceived since the appellants have not shown how the respondent could have taken this into account and we fail to see how Ewura can consider the viability of the investors without taking into account consumer interests and the country’s economy,” said Judge Sheikh.

She further noted that the appellants ought to have brought evidence to prove how they were adversely affected by the new formula in spite of being efficient to the extent that their financial viability would be adversely affected.

She noted that the Tribunal had to dismiss the appeal because there was no evidence to substantiate loss suffered or incurred by the oil marketing companies as a result of the new formula.

“Since the cap prices cover the whole industry, we cannot agree with the appellants’ contention that the new prices adversely affect competition,” she ruled.

The three also ruled that in arriving at the new pricing formula, Ewura had considered all the factors,  including the consumer and investor interests, the cost of supplying the petroleum products and the relevant benchmarks,  including Platts quotations as well as other factors provided in the law.

“The fact that cap prices are different in different locations is, in our view, a clear indicator that the regulator had taken into account both consumer and investor interests,” she said.

Elaborating further, Judge Sheikh noted that return on investment was a long term process and it does not accrue within a short period of time.

 “The very fact that a margin was set in the formula is an indicator that the issue of return on assets was considered,” she said.

She said the fact that the appellants were not in favour of the reviewed formula does not mean that the respondent acted without taking into consideration the appellants’ interests.

Source: The Citizen (01/10/2012): http://www.thecitizen.co.tz/news/-/26155-judge-throws-out-appeal-on-oil-pricing