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Zimbabwe fuel marking will deter smuggling

by Staff reporter
18 Feb 2019 at 06:50hrs | Views
Energy and Power Development Minister Joram Gumbo says his ministry has requested funding, potentially several millions of dollars from Treasury, to start fuel marking to curtail  illegal activities such as adulteration and diversion of fuel.

These have been identified as partially contributing to fuel shortages rocking the country.

The request comes as Zimbabwe, since October last year, has been experiencing acute shortages of fuel after demand surged drastically.

Addressing a media briefing in Harare early last week to give an update on the fuel situation, Minister Gumbo said his ministry had requested funding from Treasury to implement fuel marking, as Government moves to resolve challenges in the industry.

Secretary for Energy and Power Development Engineer Gloria Magombo said the energy ministry was "looking at about 1,5 cents per every litre that is marked."

As such, going by current fuel consumption levels of 2.77 billion litres per year, the ministry would require an average of $41 million to implement the fuel marking programme.

However, constrained Treasury is yet to avail the funding given it is running on a shoestring budget due to resource limitations, which saw Finance Minister Mthuli introducing austerity measures to efficiently manage little available finances.

Minister Gumbo said consumption of fuel in Zimbabwe had increased drastically from about 1 million litres of petrol and 1,9 million litres of diesel per day in April 2018 to an average 7,6 million litres daily for both petrol and diesel in six months to October 2018, after demand inexplicably sky-rocketed.

"As a ministry, we have not been able to get funding and we are still negotiating with the ministry of finance so that we can do what we call fuel marking, so we can know that the fuel sold outside or inside the country is our own or is not ours," said Minister Gumbo.

The Zimbabwe Revenue Authority (Zimra) is on record saying some unscrupulous individuals misrepresent that fuel is in transit and avoid paying the relevant duties yet the commodity would be destined for domestic consumption.

Minister Gumbo indicated that it was possible the sudden huge demand for fuel in the country last year partially stemmed from the arbitrage activities by people who were hoarding the precious commodity and reselling it at higher prices on parallel markets either in or outside the country.

This is the reason the Government just more than doubled the prices for both diesel ($1,24 to $3,11/litre) and petrol ($1,49 to $3,31/litre) to make hoarding of fuel for arbitrage, fanned by currency issues in Zimbabwe, less profitable.

Minister Gumbo said records existed of some people who were recently arrested in neighbouring Zambia after smuggling 15 tankers worth of fuel from Zimbabwe.

Governments and oil companies across the world lose significant amounts of revenue every year as a result of the illegal diversion of low-grade or tax-free transit fuels into premium grade domestic fuels, research findings show.

Analysts have also estimated that global demand for petroleum products will increase by 50 percent over the next 20 years, regardless of growing presence of electric vehicles.

And as the oil industry expands and prices of petroleum products increase, the threat from people seeking to profit from fuel adulteration and illegal trading is projected to grow in tandem.

As such, fuel marking can help by deterring illegal trade in fuel and fuel adulteration with substandard products, ensuring government collects appropriate revenues from excise taxes on fuel, protects integrity of automotive and heating fuels- thereby increasing the confidence of consumers.

Further, the fuel marking strategy can help in protecting vehicles by ensuring the correct quality of fuel and preventing the illegal import of no or low-tax products and the dumping of transit, export or subsidised fuels in the country.

Zimbabwe consumed almost 480 million more litres of petrol and diesel in six months between June and November last year compared to the same period in 2017, representing a staggering 77 percent increase, at an additional foreign currency cost of more than US$200 million.

And in the period to October 2018, the country imported US$1,8 billion worth of fuel, which is the single biggest consumer of hard currency.

What is, however, intriguing is that the significant growth in fuel consumption, especially diesel, has not been matched by marked improvement in economic activity, raising questions about whether the demand is genuine or artificial.

This is because while official statistics show similar growth in the consumption of diesel and petrol, this discounted explanations around more personal use or more people driving to work for the huge jump in consumption.

A high percentage of diesel fuel is used by commercial entities than by private commuters. Thus one would expect a close correlation between diesel consumption and economic growth.

Source - sundaymail

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