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Pressure on fuel prices

Remove 3 levies from fuel—Cama

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John Kapito

Pressure is mounting on the country’s fuel pump prices following a hike in the landed cost of the commodity, a development that has seen the fuel Price Stabilisation Fund (PSF) nearing empty, Times Business has established.

As at January 25, PSF balances for petrol, diesel and paraffin averaged K0.9 billion against the recommended minimum of K5 billion.

According to the Malawi Energy Regulatory Authority (Mera), since October last year, when fuel prices were last revised, the Free on Board price for the commodity has gone up while the exchange rate has slightly depreciated against the dollar.

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In a statement on Wednesday, Mera says the FOB prices of petrol, diesel and paraffin have increased by 7.15 percent, 14.87 percent and 15.99 percent, respectively.

During the same period, the Kwacha has slightly depreciated against the dollar by 0.12 percent, from an average of K823.49 per dollar to the current average of K824.48 to the greenbuck.

“The combined effect of the performance of the key determinants may result in higher landed costs of petroleum products in the month of February 2022. To date, the landed costs of petrol, diesel and paraffin have increased by 6.04 percent, 13.35 percent, and 13.91 percent, respectively.

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“Under the Automatic Fuel Pricing Mechanism, pump prices qualify for an adjustment when the landed costs of petroleum products move beyond the 5 percent trigger limit,” Mera says.

According to Mera, during its upcoming energy price reviews, it will consider changes in landed costs; the PSF status; the need to enable importing companies to recover importation costs; and the goal of promoting consumers’ interests with respect to fuel prices and continuity of supply.

But in its letter to the Clerk of Parliament dated January 24 2022, the Consumers Association of Malawi has urged authorities to remove road, Marep and MBS Cess levies from the fuel price build-up to prevent fuel prices from going up again.

In the letter, copied to Mera Chief Executive Officer and Secretary for Energy, Cama Executive Director John Kapito said when fuel prices go up there is an immediate increase on prices of most goods and services, thereby hurting consumers.

On road levy, Kapito says the Roads Authority has just introduced the toll gate tax whose purpose is similar to that of the Road Levy. He said it is unfair to punish consumers with double taxation for the same type of service or product.

“The Malawi Rural Electrification Levy has been part of the petroleum price build-up for a long time, this levy was intended to develop rural electricity connection infrastructure with hope to improve rural electricity access, unfortunately, this is a tax or levy whose accountability has been subjected to corruption.

“There is no significant impact on access to electricity for the rural masses, this is also one tax or levy that is loaded on a wrong and sensitive product like fuel and we are proposing if this tax is moved to taxes under electricity distribution or generation,” Kapito said.

He added that removing the levies, the price of petrol could come down to K950 per litre while that of diesel could fall to K931.00 per litre.

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