Experts praise fuel levies freeze, but want more

Consumers and economists have praised government for freezing some fuel levies that contributed to high fuel prices.

But they have also called on the Malawi Energy Regulatory Authority (Mera) to continuously review fuel levies to mitigate rising global fuel prices.

They said this on Sunday in reaction to the 22 percent rise in fuel pump prices as announced on Saturday by the Mera board.

In an interview, Consumers Association of Malawi (Cama) executive director John Kapito said when fuel prices go up, there is a corresponding price increase on other goods and services.

He said while consumers are assured of continued supply of fuel in the country, he hopes that the business community will not take advantage of the situation to increase commodity prices unnecessarily

Kapito said: “Consumers are already going through one of the hardest times and it will be unfair to punish them. While the fuel prices are justified, we would also remind Mera to continue reviewing the levies.

“We are happy that the Rural Electrification Levy and few others have been suspended and this has made the fuel pump prices stabilise. But we hope more can be done.”

In a statement on Saturday, Mera increased fuel prices by 20 percent per litre for petrol, 31.25 for diesel and 14.74 percent for paraffin.

With such percentage increase, petrol will now sell at K1 380 per litre from K1 150, diesel price will sell at K1 470 from K1 120 while paraffin will be selling at K956 from K833.20.

The energy regulator said to mitigate a higher fuel price increase, the board temporarily removed Rural Electrification Levy, Energy Regulation Levy component of K4 per litre being provision for Mera office complex.

Malawi Confederation of Chambers of Commerce and Industry (MCCCI) president James Chimwaza on Sunday welcomed the slight increase, but maintained that it will still have adverse effects on businesses.

He said: “The increase was expected because it is triggered by external forces. However, we have to mitigate the impact of external factors using locally available means to sustain businesses and the economy.”

However, Chimwaza called on authorities to fast-track implementation of the Nsanje-Marka rail project that connects Malawi and Mozambique to facilitate cheaper movement of goods, especially fuel.

“The expensive nature of diesel is a blow for the private sector,” he said.

On his part, economist Milward Tobias, who is executive director of Centre for Research and Consultancy, said any fuel price increase translates into high cost of living.

“The price increases could not be avoided because it is influenced by factors outside Mera’s control,” he said. However, he said the government should be commended for minimising the increase by reducing levies.

Tobias proposed that other components in the fuel price build-up, such as the distribution fund should also be reviewed.

He said the rise in fuel prices will negatively impact the national budget execution.

Tobias said: “The economy is run by mobility of goods and people so when fuel prices rise everything gets affected. Travel constitutes a substantial part of the national budget and in it fuel is a major component.

“Since fuel price is inflationary, prices of all goods and services that were budgeted for are likely to increase. The national budget may deliver less goods and services than were planned.”

As a solution, he said there is need for strict austerity, starting with the leadership to reduce less useful travel, less impactful workshops and effect with urgency, the expenditure control measures announced in Minister of Finance Sosten Gwengwe’s budget statement.

To further cushion people from the rising cost of living, Tobias said the government should start implementing of the development projects contained in the budget.

Associate professor of economics at the Malawi University of Business and Applied Sciences (Mubas) Betchani Tchereni said while the price hike was highly anticipated, the only challenge is that the rise may trigger inflationary pressures.

Mera consumer affairs and public relations manager Fitina Khonje on Sunday said the fuel levies will from time to time be reviewed in line with the government’s policy.

“While the levies have been temporarily removed, Mera will at some point pay for the arrears that will accumulate during the period that the levies will not be collected.

“This is because the levies are legally binding, unless such provisions are otherwise changed by authorities,” she said.