Despite the recent government announcement on the reduction of excise duty on fuel, the cost build up remains very high owing to several taxes and levies.
The recent reduction of excise duty on fuel has been welcomed by most stakeholders despite Zimbabwe’s fuel remaining on the high if compared to regional prices.
An interrogation into the fuel cost build up shows that government taxes and levies add 58.2 cents and 44.2 cents to the petrol and diesel pump price respectively.
The taxes include excise duty, ZINARA road levy at 6 cents per litre for both petrol and diesel, carbon tax at 13 cents per litre for diesel and 4 cents per litre for petrol and debt redemption levy at 0.013 cents and 0.07 cents per litre for diesel and petrol respectively, introduced to clear a US$170 million NOCZIM debt.
There is also the strategic reserve levy which stands 0.015 cents per litre.
After the reduction of excise duty, fuel is selling at $1.23 and $1.35 per litre for diesel and petrol respectively.
Also, fuel prices, which are set through a pricing model agreed to between the Ministry of Energy and Power Development, the Zimbabwe Energy Regulatory Authority (ZERA) and oil companies, have remained high despite carrying a 5-15% component of ethanol.
The president of the Motor Industry of Zimbabwe, Mr Simplisio Shamba acknowledged the government’s reduction of excise duty but said continued engagement is needed to review the fuel prices to be competitive in the region
Production costs for most manufacturing industries are high mostly due to fuel which is a major cost driver.
This leaves most local products not price competitive and such a situation raises the appeal of import substitution, which has consequences of undermining current efforts to develop the local industry.