THE price of fuel is set to come down following a decision by the Minister of Finance Tendai Biti to review fuel levies and duty.
Speaking to businessdigest yesterday, Minster for Power Development Elias Mudzuri said following his meeting with Biti this week, they agreed on important issues that would ensure viability and constant supplies of fuel.
â€œA statutory instrument would be published with regard to the revised tariffs. We also agreed on the Noczim issue (scrapping of debt redemption),â€ Mudzuri said.
â€œHe also promised to source funding for the industry to ensure it remains viable,â€ he said.
This comes as Mudzuri on Monday summoned all chief executives of oil companies to discuss their cost builds and factors affecting their operations.
Industry executive executives who attended the meeting told businessdigest that the major issue they wanted Mudzuri to address was the reduction of taxes and levies.
â€œOil companies are only making 7% (return), yet government is making 55% on petrol and 35% on diesel on the free on board (FOB) price, which is the cost of the product before including cost of freight and insurance,â€ an official who attended the meeting said.
Officials said Mudzuri advised oil company players that he would meet with Biti to discuss the issues which are being described as â€œhot and urgentâ€.
â€œFor an oil company to break even it needs to import a minimum of 2 000 000 litres per month, and presently that is not happening. There has never been any funding given to oil companies over the years. If you include overheads in their operations you find that they are operating at a loss,â€ an insider said.
Players in the oil industry said it was now a â€œhand-to-mouth business which was being personalised or politicisedâ€.
Asked by businessdigest about the fuel situation in Zimbabwe on Wednesday, the principals of the Business Council of Zimbabwe (BCZ) which formalised the apex body by appending their signatures to a constitution that would govern it said the fuel situation needed to be addressed â€œas soon as possibleâ€ as it plays a pivotal role in the revival of the economy.
The signing by their principals on Wednesday means that the BCZ, which was formed in September last year, is now a legally constituted body.
Zimbabwe Commercial Farmers Union president Wilson Nyabonda said the challenges affecting the oil industry negatively affected the economy as a whole.
â€œThere is need for all stakeholders to speak with one voice. If the fuel issue is not addressed, it will affect viability of every sector and it is proving to be inflationary,â€ he said.
Confederation of Zimbabwe Industry president Kumbirai Katsande said there was a danger that the country would price its self out of the market if the issue was not immediately addressed.
â€œWe must go for a low cost economy, especially when our borders are being opened. There will be so much competition,â€ Katsande said.
Zimbabwe National Chamber of Commerce president Obert Sibanda said fuel was the backbone of industry and therefore â€œviable levies and taxes need to be adopted to ensure all sectors of the economy record positive gainsâ€.
Oil companies said the major challenge they were encountering was paying duty upfront before other transactions were done.
They also said long-term plans that need to be addressed were to ensure there are facilities in place to â€œsmoothlyâ€ bring fuel into the country.
According to papers seen by businessdigest, oil companies, said government should reduce carbon tax from $0,013 a litre for diesel to $0,005, and $0,040 a litre for petrol to $0,005 per litre.
â€œZimbabwe National Road Authority Road levy needs to be slashed to $0,01 a litre of petrol and diesel,â€ reads the document in part.
Â As of yesterday the price of fuel was higher by an average of US$0,26c compared to what the region is charging.
â€œWe cannot squeeze revenue targets from the same volume, but rather reduce taxes and excise duties to ensure we raise volumes especially through diesel so that industry produces and those volumes are boosted and therefore raise the revenue base,â€ the document said.
BY PAUL NYAKAZEYA