The fuel levy question that just wont go away

Dar es Salaam. The raging debate on rising fuel prices now focuses more on taxes, fuel levies and other costs payable to government agencies, with commentators suggesting should be reviewed in a bid to give consumers a relief.

The Energy and Water Utilities Regulatory Authority (Ewura) announced new cap prices that pushed pump prices to record highs starting Wednesday.

While the government has promised to act on factors that are within its control, experts have suggested a simpler and quicker way to achieve that goal, including the scrapping some levies.

Price template from the regulator indicates, for instance, that it costs Sh1,910.01 to deliver a litre of petrol to the port of Dar es Salaam before it’s charged Sh920.65 in government taxes.

The petrol cargo is also charged Sh20 million per vessel as customs processing fee, another Sh20 million per vessel as fee for Tanzania Shipping Agencies Corporation (Tasac), Sh7 million as Weights and Measures fee and Sh12.8 million per vessel as fee for Tanzania Bureau of Standards (TBS).

After paying that, the retail traders also have to incur transport cost, service levies to local authorities and other fees and profit margin for executive agencies, all adding up to the pump price.

Experts aired differed proposals including temporary measures and establishment of a price stabilization fund as part of long-term strategies.

ACT Wazalendo leader Zitto Kabwe asked the government to suspend charging Sh500 in levies per litre of petrol, diesel and kerosene for six months, believing that by doing so, the government will reduce the burden citizens currently carry.

According to him, if there are technical issues that can make the suspension difficult, the government should consider doing that for diesel which is the most consumed fuel in the country.

By suspending the Sh500 levey, Mr Kabwe estimates that the government will lose about Sh150 billion per month which is equivalent to Sh900 billion for the six-month period.

But, in order to compensate for the money mostly used for rural electrification and water supply, Mr Kabwe said the government has the ability to take out an interest-free loan from the International Monetary Fund (IMF) for that.

“The government, using Tanzania’s eligible foreign exchange reserves in IMF, should apply for an interest-free loan of between $350 million and $400 million equivalent to an average of Sh920 billion which will compensate the lost revenue from the fuel levy,” said Mr Kabwe who termed his proposal as pragmatic.

“Then the government will direct the money to projects that were funded by taxes and levies obtained from oil products to cover all funding for development projects that were suspended for those six months,” he added.

He said, during the period, the government will be monitoring global trends of oil prices until when things noramalise and are stable before recharging the Sh500 levies per litre.

Precipitated by the recovery efforts from Covid-19 pandemic and later the US-NATO-led sanctions in response to Russia’s invasion of Ukraine, fuel prices in Tanzania have soared, rising by Sh1,000 during the past one year.

Ththe two factors have since sent transport costs up, and exerted pressure on the prices of various other goods and services that need to be transported to the market.

On Thurday, Energy Minister January Makamba told Parliament that the government was aware of the public outcry and that it was doing everything possible to tackle issues withing its powers.