Fradreck Gorwe Business Reporter
Government has reduced duty on diesel and petrol to cushion consumers from the effects of the latest round of fuel price increases, an official in the Ministry of Finance and Economic Development has said.
The decision to reduce by half, the duty on fuel, comes in the wake of fuel price increases announced by the Zimbabwe Energy Regulatory Authority (ZERA) yesterday.
According to ZERA’s reviewed prices, the maximum pump price for petrol is now RTGS$4,97 per litre, up from $3,36 per litre while that of diesel is now $4,89, up from $3,22 per litre.
ZERA hiked fuel prices following the Reserve Bank of Zimbabwe’s (RBZ)’s decision to stop providing Oil Marketing Companies (OMCs) with foreign currency at a 1:1 exchange rate.
In a statement released on Monday, the RBZ said with effective from May 21, 2019 all fuel dealers will now have to “procure foreign currency for fuel through the interbank foreign exchange market to mitigate against arbitrage in the economy.”
Said the RBZ: “The Reserve Bank of Zimbabwe (the Bank) is pleased to advise the public that with effect from 21 May 2019, the procurement of fuel by the Oil Marketing Companies (OMCs) shall be done though the interbank foreign exchange market.”
The new arrangement effectively means the discontinuation of the 1:1 exchange rate that OMCs used before in procuring fuel.
The decision was also undertaken “to promote the efficient use of foreign exchange and to minimise and guard against incidences of arbitrage within the economy.”
On average, prices yesterday went up by 51,86 percent for diesel and 47,9 percent for petrol.
But the increase could have been much more had Government not intervened through a 50 percent reduction in duty on fuel. Without the reduction, diesel’s price would have increased to $5,79 per litre while that of petrol would have increased to $6,12 per litre.
“The Government has reduced the duty on petrol and diesel. As you might be aware, the duties were $2,30 for petrol and $2,05 for diesel. The duty is now reduced to 90 cents for diesel and $1,15 for petrol,” Permanent Secretary in the Ministry of Finance George Guvamatanga said in a video released on social media by the Ministry of Information, Publicity and Broadcasting Services.
“This has been done in order to make sure that we cushion the public from increases in the price of fuel,” he said.
Speaking to The Herald yesterday, Mr Guvamatanga said the duty on fuel, though reduced, will be used to subsidise public transport fares through Zupco, the public transporter.
The subsidy will see Zupco reduce its fares by half from $1 to 50 cents for distance below 20 kilometres and from $1,50 to 75 cents from distances between 20 and 30 kilometres. The next 10 kilometres will cost $1 in bus fare from the previous $2.
The reduction, Mr Guvamatanga said, was necessitated by the need to cushion the travelling public that have been exposed to unfair pricing by the private transporters.
“We also wanted to put money back in the pockets of people and this will be done through savings on transport costs,” he said.
Mr Guvamatanga allayed fears that the Zupco subsidies are not sustainable saying the move was well calculated and will not burden the country’s purse.
“We know exactly how much this is going to cost us, we have done some mathematics, and we have factored in this subsidy,” he quipped.
“A subsidy if its quantified, budgeted for and targeted, it’s a good subsidy. Safety nets by their nature are subsidies because you want to protect the more vulnerable members of the society,” said Mr Guvamatanga.
At least 15 cents (5 cents from diesel and 10 cents from petrol) in fuel levies per litre will go towards subsidising the public transport system, he said.
Government has announced plans to revive Zupco and will import thousands of conversional buses to be distributed among the company’s operating divisions.