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Kiraitu: I cannot hurt the economy for populist sake

By | Published Thu, May 13th 2010 at 00:00, Updated January 1st 1970 at 03:00 GMT +3

By David Ochami

The National Economic Council has vetoed attempts to regulate petroleum products’ prices early, Energy Minister Kiraitu Murungi has said.

This is against recommendations by the Energy Regulatory Commission (ERC).

The minister said controlling the price of the products might be populist but not economically sound.

He ruled out any downward adjustments and controls, saying they had been tried in Tanzania but failed.

The minister disclosed that Treasury had been reluctant to subsidise expansion of the National Oil Corporation (NOC) to enable the State firm to sell petroleum products at affordable prices.

Last week, Director of Petroleum Peter Nduru told Parliament’s Energy Committee the minister had failed to gazette regulations prepared by the commission in April last year, after extensive consultations.

The recommendations would have enabled the Government to control activities of oil cartels blamed for high and unstable petroleum prices.

Following a sharp rise in prices last week, Nduru alleged the peak had also been occasioned by the weakening of the shilling against the dollar and upward cost of oil in the international market at the close of April.

Committee Chairman James Rege, members Edwin Yinda and Emilio Kathuri accused the commission of allowing oil sector players to fleece consumers and investors by failing to rein in on "greedy" dealers.

Blame game

But Mr Nduru defended the commission and blamed the minister and vagaries of the global system of capital. "We do not have the key to regulation. Up to now the minister has not gazetted the regulations," he told the parliamentary team.

But yesterday the minister gave a different story and shifted blame over the non-gazettement to the National Economic Council.

Murungi acknowledged receiving the recommendations, but alleged opposition by the council swayed his hand.

"However populist I want to be, I cannot do anything that will ruin the economy," he said, referring to calls for price control and regulation.

He said upon receiving the recommendations of the ERC, he shared the information with the NEC, which felt adopting them would amount to reintroducing price controls.

The minister said price controls would go against the practice in liberal economics.

He said dealers in Tanzania defied similar regulations and added the only remedy for the Kenyan consumer was for Treasury to subsidise the National Oil Corporation to enable it sell products at cheaper prices.

Murungi announced that the Government intended to expand NOC’s oil pumps from 70 to 150, subject to availability of money.

Price of crude oil rose to $84.66 per barrel in April from $78.3 per barrel in March against a weakening shilling.



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