Malawi Confederation of Chambers of Commerce and Industry (MCCCI) has urged Treasury to reduce or remove some of the fuel levies as one way of cushioning the impact of landed cost of petroleum products.
But Treasury spokesperson Nations Msowoya has defended government’s decision to have six fuel levies in price build-up as it is also applicable to other countries in the region.
Malawi Energy Regulatory Authority (Mera) spokesperson Fitina Khonje in an interview on Monday said the regulator only implements what government has introduced.
Currently, there are six levies built in the price of fuel, which are charged per litre.
According to the latest price build-up of Mera, the levies are energy regulatory levy, which costs K10 per litre of diesel, petrol and paraffin; rural electrification levy charged at K37.11 for petrol, K36.71 for diesel and K29.19 for paraffin; price stabilisation fund (PSF) at K22.61 for petrol, K22.21 for diesel and K21.30 for paraffin; fuel storage levy at K5 for all fuels; Malawi Bureau of Standards (MBS) cess levy at K0.89 for petrol, K0.88 and K0.84 and road fund levy at K90.57 for petrol and K89.73 diesel.
This means that for every litre of fuel, K166.36 on petrol, K164.53 on diesel and K66.33 on paraffin goes to government in form of levies.
Effective November 4, Mera increased the pump prices for petrol, diesel and paraffin to K824 per litre, K815 per litre and K648 per litre, respectively.
MCCCI chief executive officer Chancellor Kaferapanjira told Business Review on Tuesday that Malawi’s cost of fuel continues to rise sharply cmpared to its neighbours because of “high and irrelevant levies” on the fuel structure.
He argued that while the private sector appreciates the role fuel revenue plays, the MBS and rural electrification levies ought to be funded by other means other than pouring the burden on industries and final consumers.
He said: “Why should MBS get that much for testing only one or two tankers and sometimes not even testing one? Rural electrification ought to be funded by the normal budget.
“Road levy should not apply when buying fuel for use which is not road transport. For instance, factory use does not involve road usage. The increase in FOB [free on board] prices would thus have been compensated by removal of, or reduction in these levies.”
Kaferapanjira said looking at the country’s situation now, coupled with frequent and persisting power outages, fuel, especially diesel, has become an alternative source of electricity.
“The recent hike means that the industry is suffering twice. Our plea to government is that they should adjust these levies,” he said.
However, Msowoya said while they may discuss MBS levy, removing the rural electrification levy on the fuel price build-up would stifle the country’s efforts of increasing electricity penetration.
“We appreciate the fact that fuel has a broader economic impact, but the levies we are applying here are similar to our counterparts in the region. Since we started using fuel levy for Malawi Rural Electrification Project [Marep], government has connected many rural areas in a bid to increase electricity penetration,” he said.
Lately, the Price Stabilisation Fund (PSF)—an account that accumulates funds from fuel sales meant to cushion the price of petroleum on the local market—has been on the spotlight after alleged abuses involving K3 billion that was said to have been diverted to buy maize for Agricultural Development and Marketing Corporation (Admarc).
Malawi introduced the road maintenance levy in the petroleum price build-up to create a basket of funds for construction of new roads and maintenance of existing ones.
Under the arrangement, motorists pay for road maintenance through every litre they buy from the pump. n