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GOVT PAYS CLOSE TO E600M FUEL CUSHION

By Nonduduzo Kunene | 2021-12-06

Mbabane - Government does cushion the price of fuel, and has spent close to E600 million cushioning fuel prices this year alone. With the price of fuel going up last week, the second time within 30 days it had done so, consumers had called for government intervention to cushion the hike. Effective last Friday, Unleaded petrol increased by 90 cent per litre which increased the price to E17.15 whilst diesel 50 and illumination paraffin increased by 80 cents to E17.

Consumers feared that the fuel hike would influence the hike of all commodities in the country, thus people would have little disposable income. As it stands the country taxes and collects levies on petrol and diesel products.

Acting principal in the ministry of natural resources and energy Dumisani Mngomezulu explained that the country has a fuel tax of E3.85 per litre, which goes straight into the government consolidated fund. Levy Fuel oil levy is at 50 c/l which is for the cushioning of fuel price increases and it goes to the Strategic Oil Reserve Fund. Motor Vehicle Accident Fund levy at 35 c/l which is for the Sincephetelo Motor Vehicle Accidents Fund.

Other levies include Eswatini National Petroleum Company levy, which is at 35 c/l for the Eswatini National Petroleum Company as well as customs and excise duty 4 c/l which contributes to the Southern African Customs Union (SACU) sharing formulae.

Mngomezulu explained that Eswatini is among the countries whereby motorists pay lower fuel prices, adding that the ministry has spent E577 million this year to cushion the oil companies.

He added that the situation is highly volatile to an extent that about E40 million is required to cushion monthly increases, an amount that far outweighs the monthly collection of E15 million from the fuel levy, hence government was compelled to increase fuel prices.

He pointed out that if it was not for government’s cushioning, the public would be paying higher fuel prices. The acting principal secretary stated that unleaded petrol would cost at least E19.18 instead of E17.15, diesel E18.19 and paraffin would be at E12.20.

He cited that this month all the SACU countries increased their fuel prices as follows; South Africa by 75 c/l, Lesotho 68 c/l, Namibia by 70 c/l, and Botswana by 67 c/l. SACU countries other than South Africa adopted a fuel stabilisation (cushioning) mechanism.

The ministry of natural resources and energy monitors the international fuel prices and the Lilangeni/Dollar exchange rate on a daily basis and the basic fuel price formulae is used to calculate the prevailing market cost of fuel.

Before effecting fuel hike, Mngomezulu stated that the market prices are then contrasted with the prevailing pump prices to assess whether there is a surplus or deficit incurred by the oil companies. In case of a deficit under recovery it means the prevailing pump price is below the actual market cost of fuel, hence the situation warrants a fuel price increase.

However, to cushion the consumers and the economy from high fuel prices, the ministry adopted fuel stabilisation or cushioning mechanism through the Strategic Oil Reserve Fund financed by the fuel oil levy mentioned above.

Therefore, in determining a price increase the government will consider the magnitude of the deficit and small under- recoveries (deficits) that can be absorbed by the fund are fully cushioned. Huge under-recoveries are partially cushioned like the fuel price is partly increased and partly cushioned at the same time in order to ensure sustainability of the fund.

For instance, the ministry is compelled to partly increase the fuel prices in cases where the deficit is more than the monthly collection from the fuel oil levy.

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