ENERGY Minister Matthew Nkhuwa says government has had to subsidise fuel prices to cushion the economic impact the COVID-19 pandemic on consumers’ livelihoods.
And Nkhuwa has announced that Indeni Petroleum Refinery is expected to resume operations within four to six weeks.
Speaking when he rendered a ministerial statement in Parliament, Tuesday, Nkhuwa said government had to effect fuel subsidies to prevent price hikes, which would have had adverse effects on the economy, particularly amid the Coronavirus pandemic.
“…Owing to the foregoing, the losses and shortfalls incurred in the importation of crude feedstock and finished products compromise further importation and security of supply of petroleum products. To recover the full cost of importing crude feedstock and finished products, the domestic prices for wholesale and pump prices needed to be adjusted upwards. However, increasing the fuel price would lead to a multiplier effect that would see prices of many goods and services increase in the country, this would have been retrogressive, especially now with the adverse impact of the COVID-19 pandemic on the global economy and the Zambian economy in particular. Mr Speaker, to prevent an upward adjustment of petroleum products, my Ministry in consultation with several stakeholders including Ministry of Finance, came up with a proposal to realign the various cost elements in the petroleum price build-up that were affected by the changes in both the local and international economic fundamentals,” Nkhuwa said.
“This necessitated zero-rating the Value Added Tax on petrol and diesel, additionally excise duty had been removed in diesel, while for petrol, the excise duty had been reduced from K2.07 to K0.64 per litre. I wish to state that the benefits of these measures have been passed on to the OMCs (Oil Marketing Companies), who before these measures, were landing the products at a higher price than the approved pump price, thereby making losses. These measures also benefitted citizens, who would have had to spend more on fuel in the event of an upward price adjustment on the commodity.”
And in response to a question from Chama South PF member of parliament Davison Mungandu on whether government was subsidising the cost of fuel, Nkhuwa agreed, but stressed that the measure was designed to cushion consumers.
“As I said in my statement, Mr Speaker, the price of fuel would have gone up a long time ago, we have not increased the price of fuel for over a year. I can say that for 14 months, we have not increased the price of fuel due to the COVID-19 situation that we are in. And we are still mindful and we know that we are seeing this situation. Therefore, we are trying to cushion the people so the answer is, yes, we have been subsidising the price of fuel,” he replied.
But in response to Liuwa UPND member of parliament Dr Situmbeko Musokotwane, who wanted to find out whether the measures were just meant to hoodwink voters ahead of the August 12 polls, Nkhuwa insisted that the fuel subsidy was solely meant to cushion consumers.
“I did indicate in my statement that we are in COVID-19 times and the situation is so bad on the ground that people cannot afford a price increase. It is as a result of the situation that we are in that we had to take care of the Zambian people, to make sure that we don’t increase the fuel price because increasing the fuel price, Mr Speaker, would have meant to say that everything else was going to go up; we had to give the Zambian people a break, Mr Speaker,” he replied.
Meanwhile, in response to Kabompo UPND member of parliament Ambrose lufuma who wanted to find out when Indeni would resume operations, Nkhuwa announced that the Ndola-based refinery will be back on-stream in four to six weeks.
“Mr Speaker, I would say that Indeni will be up and running within four to six weeks as we are finalising the letter of credit. We are trying to get a letter of credit through one of the banks, and this will be a revolving letter of credit to cover the nine remaining cargos that are on the order. So, once that is done, we won’t have any unnecessary stoppages at Indeni. Indeni will be running for the next one and half years without much problems, I thank you,” he replied.
“It should be noted that Indeni Refinery has been shut down since 12th December, 2020. I am confident that once the revolving facility using a letter of credit is concluded, Indeni Refinery will be back on-stream in the next few weeks. With these measures, I am confident that the situation will be normalised as most OMCs have indicated willingness to import petroleum products.”
In his statement, Nkhuwa, who is also Chingola PF member of parliament, revealed that 87 OMCs had been given a waiver on customs duty to import 1.9 billion litres of diesel and 934 million litres of petrol for a period of six months.
“I am aware that there have been some reports of fuel shortages in some parts of the country, but I would like to assure the country that we have instituted a number of measures aimed at improving the security of supply. You may wish to note that with support from the Ministry of Finance, a waiver on customs duty has been granted to OMCs to boost importation of finished petroleum products for a period of six months starting from 1st January, 2021, to 30th June, 2021, this will complement government contracted suppliers, improve security of supply. The total number of OMCs given the waiver to import is 87 and the total quantities of diesel allocated to them is 1.9 billion litres, and the total quantities for petrol is 934 million litres,” said Nkhuwa.