THE World Bank has said the use of Indeni Refinery in Ndola increases the cost of fuel for the Government and the consumers, as it is inefficient and technologically unsuited for the 21st century fuel needs.
World Bank country director Ina Ruthenberg said this was one of the underlying challenges associated with the supply of fuel in Zambia that needed to be resolved.
Ms Ruthenberg said that any new refinery based on Zambia’s needs could be too small to compete with the massive new refineries coming around the world.INDENI oil refinery
She said in light of the worldwide transition towards larger scale and more efficient oil refineries, it would be important to re-evaluate the benefits of continuing to operate a national refinery.
Ms Ruthenberg was speaking when she appeared before the Parliamentary Committee on Estimates chaired by Mbala Member of Parliament Mwalimu Simfukwe in Lusaka yesterday.
“If the refinery approach was abandoned and Zambia wanted to move to a price adjustment system like South Africa, institutional coordination between the Energy Regulation Board (ERB), Ministry of Energy and Water and Ministry of Finance needs to be improved,” she said.
Ms Ruthenberg said there remained a need to increase transparency in national fuel procurement as the availability and transparency of energy subsidy data was essential in overcoming some of the challenges related to reform.
She said the Government should start increasing electricity tariffs in a gradual manner, for both mining and non-mining consumers, in order to try and reduce the subsidy.
Ms Ruthenberg said to do this, the Government should ensure that both mining and non-mining consumers were brought around the table to improve the financial sustainability of the sector.
She, however, said that low tariffs were not the only issue in the electricity sector, but there were other challenges which needed to be addressed.
The challenges included strengthening the sector’s planning and procurement processes, carrying out cost supply study to determine cost-reflective tariffs, reviewing Zesco and implementing demand side measures.
“Zambia needs to develop and update regularly a Least Cost Power Supply Development Plan (LCPDP) that lays out investments required in all segments of the power sector, and a procurement framework that ensures the transparent and competitive delivery of new plant should be established,” Ms Ruthenberg said.
She added that implementing demand side measures would help reduce demand for electricity, as such a move had been successfully used in Ethiopia, Rwanda and Uganda, among other countries.