OIL Marketing Companies Association of Zambia (OMCAZ) president Dr Kafula Mubanga says the association projects the price of fuel to reach K35 per litre in the next two months if government goes ahead to remove tax waivers.
Commenting on the pronouncement by Energy Minister Peter Kapala that government would reintroduce tax waivers by the end of June, Dr Mubanga said the removal of taxes had cushioned the fuel costing structure.
“I think that basically, the removal of taxes is a better way to ensure that there is a little bit of cushion as far as the costing structure is concerned. We do project that between now and June we expect fuel to be between K27, K30 and K35. You anticipate such a trajectory owing to so many reasons because you have your prices going up, the war in Ukraine is still ongoing and things like that. If that is the case there will still be constant shortages on the market. Products will be in short supply,” he said.
“Even if the war ended today, what you will notice is that there are still many sanctions that are put on Russia. Of course, you see that there are no direct sanctions on natural gas but the economy of Russia as a whole has faced a couple of sanctions that would definitely affect production. I mean at the end of the day, a steep rise in terms of your prices on the international market, so I think with that in mind we do anticipate that pump price will rise up to slightly above K35.”
He said there was need for the government to extend tax waivers on fuel.
“I think that government would do justice if it extended the waivers. The basic benefits that you get from the waivers is that you have so many people that are participating in bringing in the product in the country as opposed to restricting to a few OMCs. Now with the current situation on international markets, you have a situation where prices are going up, people must put in their private investment to be able to meet the demand on the market, so it is wise for government to still extend the waivers to allow players and investment from various sectors to be able to participate to ensure that there is no shortfall in terms of the supply,” said Dr Mubanga.
“The current model that the government is using is sustainable to a certain extent, remember that these OMCs are bringing products, the major OMCs that have been supplying government, then the government [fails to] pay. But it is very easy to fall into a debt trap as you are moving to that kind of approach. If you delay to pay them back it means that you are going back to fuel shortage. You cannot combine the two, fuel increase and fuel shortage is seriously a crisis. So yes you can have your prices going up but you can’t afford to have a fuel shortage on the market.”