Mera says ‘not collecting’ fuel levy
Malawi Energy Regulatory Authority (Mera) says it is not collecting the road maintenance levy in the fuel pump price build up because importers are using the same as compensation due to low fuel price.
Fuel importers, legally referred to as licensees under the law, are obliged to remit the levy to Mera which has to submit to Roads Fund Administration (RFA) to finance road maintenance.
The ongoing compensation arrangement, although outside the law, is apparently aimed at cushioning consumers from a recommended increase in fuel pump prices, a decision our sources say is more political than economical.
In a written response yesterday, Mera public relations and consumer affairs manager Fitina Khonje conceded that the landing cost of fuel in the country was higher than the prevailing fuel pump price, as such importers were under-recovering and thus failing to remit the levy.
She said: “Mera is failing to remit the levies because it has not been receiving the said levies from importers. The importers have not been able to remit the levies since they are landing the products at higher costs than what they are able to be compensated from the prevailing fuel pump prices.”
But Khonje could not explain why Mera has not taken the licensees to task for flouting the law and whether it is party to the arrangement.
Minister of Energy Ibrahim Matola referred The Nation to his Principal Secretary Engineer Alfonso Chikuni who did not respond to our questionnaire either.
Both Minister of Finance and Economic Affairs Simplex Chithyola Banda and Secretary to the Treasury Betchani Tchereni did not respond to our questionnaires.
Mera’s failure to remit the levies has affected road maintenance as over 80 percent of the RFA’s maintenance budget comes from that source.
Fuel industry sources have confided that the Mera board recommended for an increase in pump prices to attain cost-reflective prices, but the political leadership was unwilling to approve purportedly due to the expected impact of another fuel price increase.
Khonje did not answer our question on whether a fuel pump price increase was an option, but hinted that the authority is working to resolve the matter within the next couple of months.
She said: “Mera is not covering nor compensating importers who are expected to remit levies. Mera is working with the importers to ensure that they remit the levies they collect by law. The challenge has been their inability [to collect] due to high costs incurred in fuel importation, an issue that Mera is reviewing.
“Mera reviews prices on a monthly basis and determines applicable pump prices. A number of factors are considered when doing this, including the impact of any price adjustments that would have on consumers and the economy in general. The desired price would be that which allows importers to fully cover the importation costs as well as enable them collect and remit all applicable levies.”
Khonje further said government subsidies are determined by the Ministry of Finance and Mera was not qualified to comment on this subject matter.
The July 2024 Malawi Economic Monitor (MEM) also suggested that fuel prices is underpriced and that the applied subsidies put pressure on the economy; hence, the need to repeal these.
Capital Hill sources are sceptical if the political leadership will buy the idea to raise the pump price being an election year.
Said one source: “It is a delicate balance; the pump price has to go up even when people think it is already unbearable. This makes economic sense. This may impact on inflation which is not desirable politically. But I think the leadership cannot afford to keep pump prices lower than reality.”
The MEM acknowledges that following the devaluation-induced increase in pump prices last November demand for fuel slightly reduced.
