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New fuel import licensing on the cards

ZIMBABWE Energy Regulatory Authority (Zera) is pushing for a new licensing regime that will result in fuel-importing companies forking out licence fees in  proportion to the volumes procured, businessdigest has established.

The proposed regime dubbed Volume Based Licensing (VBL) has since been presented to the Ministry of Energy and Power Development.

Zera chairman David Madzikanda confirmed the development.

“Zera is trying to put in place (VBL) but still subject to government approval,” Madzikanda told businessdigest.

While this is still subject to consultations, sources said the idea is to have fuel-importing players first pay token fees and thereafter pay volume-based fees each time they import fuel.

According to a source close to the development who spoke to businessdigest, fees which have been tentatively pegged at US1 cent per litre subject to approval will be administered by Zimbabwe Revenue Authority on behalf of Zera.

The source said the idea is facing stiff resistance especially from major foreign operators who ordinarily import huge quantities as this will result in them paying more money for fees.

Currently, companies are paying a procurement licensing flat fee of US$24 320.

Other requirements include proof of ownership of three retail sites and proof of fuel imports of a minimum of 10 million litres per annum.

“The VBL concept is facing resistance. Some big firms are against the idea. VBL will hit huge firms more because they import big volumes of fuel .They don’t want to see it being implemented. They prefer the current system where they pay US$24 320 per year. That is why there are delays. This initiative is more friendly to small firms who import less. The new board is experiencing some resistance to implement new policies and new direction by certain elements within Zera. The new regime will give Zera some fresh financial muscle to execute its mandate,” a source said.

A grouping of local petroleum firms, Direct Fuel Import Group (DFIG) secretary general Bart Mukucha said he supports the proposed licensing regime.

“We from outside (Zera) support this initiative. We are very happy to support the idea and we want to push it through. We want to see a very powerful Zera,” Mukucha said.

Last May Zera licensed about 34 fuel importing entities from a record 130 entities in the prior year after being embroiled in a prolonged bitter legal wrangle with indigenous fuel entities for announcing stringent licensing requirements which small players viewed as intended to promote bigger players in the sector at their expense.

Local petroleum firms, under the banner of Direct Fuel Import Group, rejected the “outrageous” conditions announced by the energy sector watchdog and accused the regulator of promoting the interests of big foreign operators.

The energy watchdog recently extended the expiry date of fuel import licences to January 15, 2022 from December 31, 2021.

“The Zimbabwe Energy Regulatory Authority (Zera) hereby notifies holders of fuel procurement licences issued in 2021 that the expiry date has been extended to Wednesday, January 15, 2022 from December 31, 2021 to ensure that there are no disruptions in the supply of fuel,” Zera said in a public notice.

Zera CEO Eddington Mazambani told businessdigest this week that licensing for this year is based on last year’s government approved conditions and the energy watchdog has not received any other licensing conditions.

Zimbabwe consumes an average of 70 million litres of diesel and petrol per month.

In the Southern African Development Community (Sadc) region, Zimbabwe now has the highest fuel prices with regional peers charging significantly lower prices. Zambia fuel costs US$0,97 per litre, Botswana US$0,728, Mozambique US$0,898, Namibia US$0,85, and South Africa US$1,073.

Zimbabwe charges petrol and diesel US$1,42 and US$1,38 respectively.

Duty accounts for US$0,30 for every litre of fuel imported via pipeline and US$0,35 per litre for fuel imported through road haulage. The Zinara Road Levy (US$0,06), Debt Redemption Levy (US$0,057), Carbon Tax (US$0,04) and other taxes are then added on top to take the total taxation to US$0,49 per every litre consumed locally.

Before the suspension of fuel blending, ethanol cost US$1 per litre.

The cost of fuel heavily feeds into the cost of production across all economic sectors.

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