Effect of bulk procurement system to the Tanzania Fuel market prices
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Mzumbe University
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A Dissertation Submitted in Partial/Fulfillment of the Requirements for Award of
Master Degree of Science in Accounting and Finance (MSc A&F)
of Mzumbe University.
This study was carried to establish whether the Bulk Procurement System is effective to control fuel market prices in Tanzania market from the importation procedure to the products’ pricing and regulation in the downstream petroleum sub-sector, focusing on pricing strategies and core drivers. The case study research design was employed in carrying out study. Primary and secondary data were collected, analyzed and tested using correlation analysis and Analysis of Variance (ANOVA) both at 0.05 levels of significance. It was revealed that the Bulk Procurement System has managed to control prices movement of petroleum product since was introduced without being affected follows the general international prices trend and the costs incurred in bringing the products to saleable state. It was also noted that international exchange rates movements has a direct impact on Platts prices, and hence movements in Platts prices are partially a reflection of international exchange rates movement. Regulation of petroleum sector by Energy and water regulatory authority (EWURA) is reasonably effective as the results shows that Oil Marketing Companies (OMCs) abide to indicative/cap prices set. From these findings, it is recommended that, Oil marketing companies have to improve on their general procurement practices to ensure that they incur reasonable costs. This includes proper planning for procurement, clearance of cargo, financing arrangement and better negotiation and sourcing. Improvement in this area may lower the total cost of acquisition and hence lower unit cost and selling prices. EWURA needs to establish alternative methods of allowing the multinational companies to import product from their own source and closely monitor their prices and compare with the world market price movement to enable to get cheap and quality product and BPS to be used for independents companies on which their prices will be used as benchmark for the country benefit at large.
This study was carried to establish whether the Bulk Procurement System is effective to control fuel market prices in Tanzania market from the importation procedure to the products’ pricing and regulation in the downstream petroleum sub-sector, focusing on pricing strategies and core drivers. The case study research design was employed in carrying out study. Primary and secondary data were collected, analyzed and tested using correlation analysis and Analysis of Variance (ANOVA) both at 0.05 levels of significance. It was revealed that the Bulk Procurement System has managed to control prices movement of petroleum product since was introduced without being affected follows the general international prices trend and the costs incurred in bringing the products to saleable state. It was also noted that international exchange rates movements has a direct impact on Platts prices, and hence movements in Platts prices are partially a reflection of international exchange rates movement. Regulation of petroleum sector by Energy and water regulatory authority (EWURA) is reasonably effective as the results shows that Oil Marketing Companies (OMCs) abide to indicative/cap prices set. From these findings, it is recommended that, Oil marketing companies have to improve on their general procurement practices to ensure that they incur reasonable costs. This includes proper planning for procurement, clearance of cargo, financing arrangement and better negotiation and sourcing. Improvement in this area may lower the total cost of acquisition and hence lower unit cost and selling prices. EWURA needs to establish alternative methods of allowing the multinational companies to import product from their own source and closely monitor their prices and compare with the world market price movement to enable to get cheap and quality product and BPS to be used for independents companies on which their prices will be used as benchmark for the country benefit at large.
Keywords
bulk procurement system