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 :: ANNOUNCEMENTS

 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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