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ECONOMIC REGULATION - Determination of Wholesale Prices |
Petroleum prices in
Zambia are determined through the Cost-Plus Pricing Model (CPM). This model has
been in effect since January 2008, after the Import Parity Pricing Model which
had been in use since 2004 was discontinued following concerns raised by
stakeholders. The CPM is used to determine prices for each cargo and provides
for longer intervals of price stability. It therefore takes into account all
costs associated with the purchase of the feedstock as shown in the table below:
|
1 |
Cost of petroleum feedstock *
(Cost-Insurance-Freight at Dar-es-salaam) |
|
|
2 |
Ocean
loss at 0.3% |
0.3% |
|
3 |
Wharfage
at 1.25% |
1.25% |
|
4 |
Handling
fees |
US$0.20/mt |
|
5 |
TIPER
fees |
US$0.75/mt |
|
6 |
Finance
Charges |
2.95% |
|
7 |
Collateral Manager |
US$1/mt |
|
8 |
TAZAMA
Storage fee |
US$2/mt |
|
9 |
Pumping
fee |
US$39/mt |
|
10 |
TAZAMA
loss at 0.85% |
0.85% |
|
11 |
Crude Oil
Import Duty at 5% |
5% |
|
12 |
Agency
fee |
US$15/mt |
|
13 |
Processing fee |
US$61.10/mt |
|
14 |
Refinery
loss |
10% |
|
15 |
Terminal
loss on finished petroleum products (0.30% & 0.50%) |
|
*This cost varies and is dependant on the price of crude oil on
the international market.
The total cost is converted into kwacha using a projected US$ to Kwacha exchange rate. The rate is assumed to be the rate that will be in effect at the time that the buyer will need to purchase US dollars for making payments to suppliers and service providers during the life of the petroleum feedstock cargo.
The CPM therefore ensures that all costs incurred in the procurement of feedstock are recovered through sales of petroleum products. This is necessary in order to collect all the funds incurred when purchasing the particular cargo.
Further, because price changes are on a cargo by cargo basis and
Calculation
of Pump price
|
1 |
WHOLESALE PRICE TO OMC |
|
a |
|
2 |
Terminal Fee |
K25,000/m3 |
b |
|
3 |
Road Levy |
7%;15% |
c |
|
4 |
Excise Duty |
21% |
d |
|
5 |
Ex Refinery Gate
|
K/M3
|
E=(a+b+c+d) |
|
6 |
Transport Margin |
K148/litre |
f |
|
7 |
OMC Margin |
K345/litre |
g |
|
8 |
TOTAL (Excl VAT)
|
|
H=(e+f+g) |
|
9 |
Dealer Margin |
K229/litre |
I |
|
10 |
PRICE TO DEALER
|
|
J= (h +i) |
|
11 |
ERB Fees |
0.70% |
k |
|
12 |
Strategic Reserves Fund |
K/litre |
l |
|
13 |
Price before VAT
|
|
m=(j+k+m) |
|
14 |
VAT |
16% |
n |
|
15 |
BENCHMARK PUMP PRICE
|
K/litre |
P=(m+n) |
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