THE World Bank says Indeni Refinery is inefficient and technologically unsuited for 21st century fuel needs.
Speaking when she appeared before the Parliamentary Committee on Estimates chaired by Mbala member of parliament Mwalimu Simfukwe in Lusaka yesterday, World Bank country director Ina Ruthenberg attributed the high cost of fuel to outdated Indeni systems.
Ruthenberg it was important to re-evaluate the benefits of operating a national refinery in light of the worldwide transition towards larger scale and more efficient oil refineries.
“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,” Ruthenberg said.
She also said there was need to increase transparency in fuel procurement and advised government to start increasing electricity tariffs in a gradual manner, for both mining and non-mining consumers, in order to reduce the subsidy.
“To do this, the government should ensure that both mining and non-mining consumers are brought around the table to improve the financial sustainability of the sector,” Ruthenberg said.
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 include 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,” said Ruthenberg.
“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.”