Road levy up, no fuel pump prices rise

The Malawi Energy Regulatory Authority (Mera) has revised the fuel road fund levy upwards by an average of 246 percent, but has maintained the March 12 2013 fuel pump prices.

The adjustments come amid pressure from the European Union—a major donor in the road sector—which threatened to suspend up to K9 billion in budgetary support after government reduced the road levy by 63 percent on average in March.

“We would have to suspend any further disbursements, which would be in the vicinity of 12-16 million euros in the current budget and the same in the forthcoming budget,” EU Ambassador Alexander Baum told the April 4 edition of The Nation.

Documentation we have seen shows that roads fund levy on petrol has been increased from K12 (about $0.03) in March to K44 (about $0.11), representing 267 percent beginning this weekend. Road levy on diesel has been revised from K12 in March to K39 (about $0.09) which represents 225 percent.

In the April 5 2013 decision made at a meeting held at Wamkulu Palace in Lilongwe, the import duty and excise duty importers pay on petrol, diesel and paraffin was also revised significantly—a relief on the part of importers.

On the other hand, Mera has increased retail price for liquified petroleum gas (LPG) by 22 percent.

This is contained in a communication from Mera chairperson Lyton Zinyemba to stakeholders such as the Petroleum Importers Limited (PIL), the National Oil Company of Malawi (Nocma), Energem Petroleum Limited (EPL), Edkom Oil Company (EOC) and Ecosave Fuels Limited (EFL) dated Friday April 5.

“Mera noted the increase in landed cost of LPG following depreciation of the Malawi kwacha since the last revision of January 2013. In order to provide for recovery of importation cost by LPG suppliers in the country, Mera has adjusted upwards by 22% the maximum retail price for LPG from K1 692.89 (about $4) to K2 071.75 (about $5.17) per kilogramme,” said Zinyemba in the letter.

In another letter addressed to Simso Investments Oil and Transport Company (SIOTC) for the attention of Mr. Simama, Mera chief executive officer Alexon Chiwaya cemented the issues of fuel pump price.

“The Malawi Energy Regulatory Authority (Mera) has in line with the automatic pricing mechanism (APM) maintained pump prices for petrol, diesel and Paraffin. However, the road levy, import duty and excise duty have been adjusted,” said Chiwaya.

This, he wrote, is effective 5th April, 2013.

Effectively, the cut on duty has no effect on importers but it cuts income into the public coffers.

A Mera source said this is a relief on importers who are usually burdened by paying more duty which usually increases as fuel prices rise with the ever falling kwacha.

“You see, world oil prices have been going down which should have meant our prices going down also but have been increasing instead because our currency is not stable; so that has an effect on importers. They should be happy with the reduction,” said the source.

In a separate interview, Petroleum Importers Limited chief operating officer Michael Ngwira, said their role is implementing what policy, makers decide on the duty.

He refused to discuss the issue further, pushing more questions to Mera and Treasury, both represented at the fuel pricing meeting.

Treasury spokesperson Nations Nsowoya suggested that there are cushions in place to mitigate the effects of reduced duty.

“The net effect on the total revenue will not be affected, there will be compensatory effect from other revenue sources,” he said.

Msowoya further explained that while it is the duty of the National Assembly to endorse most issues related to tax, not every decision requires Parliament’s approval.

“Some [issues] just require the minister to gazette. This change will be gazetted later on,” he said.

In the March fuel price build up schedule, duty free import band for petrol was at K543 per litre (about $1.35), diesel was at K529 (about $1.32) while paraffin stood at K507 (about $1.26).

Import duty on petrol in the March pump fuel price build up was at K47 (about $0.11), K48 (about $0.12) on diesel and K25 (about $0.06) on Paraffin, while excise duty was pegged at K52 (about $0.13 for petrol and diesel and K26 (about $0.06) for paraffin per litre.

Duty paid price per litre was at K643 for petrol, K629 for diesel and K558 for paraffin, which has been maintained in the April price build up schedule.

But the April 5, 2013 schedule shows that the duty free band has been increased to K575 for petrol, K555 for diesel and K508 for paraffin per litre.

While import duty has decreased to K31 for petrol, K34 for diesel and K25 for paraffin. Excise duty has lowered to K37 for petrol, K40 for diesel and K26 for paraffin.

All these and others add to what motorist pay for a litre of petrol, diesel and paraffin at the pump.

The prices have been maintained at K714.90 (about $1.78) for petrol, K693.80 (about $1.73) for diesel and K613.90 (about $1.53) for paraffin.