Fuel price adjustment meant to correct price extortion – ERB

By KETRA KALUNGA
THE fuel price adjustment has been prompted by the need to correct the price extortion that the country has had for over two years, the Energy Regulation Board (ERB) has said.
ERB director of economic regulation, Alfred Mwila said the country has had a price distortion in fuel for over two years, a situation the energy regulator wants to correct.
Mr. Mwila said the country faced a situation where the fuel price stopped responding to the dictates of the fundamentals that affect pricing which are the movement in the international oil price and the exchange rate.
He stated that the international oil pricing and exchange rate were moving adversely in that the international oil prices were increasing while the exchange rate was depreciating.
“There was a point when the exchange rate reached about K22 per US dollar and international fuel prices reached about 90 US$90 per barrel. This led to the fuel price remaining constant and was not responding to the fundamentals, therefore it was artificially low,” he said.
Mr Mwila said on ZNBC special interview that the non-response to the adverse conditions therefore promptted the need for the price adjustment because ERB couldn’t artificially maintain the price for a longer period because it was becoming fairly unsustainable.
“In December 2019 the exchange rate was around K13 to K14 per US dollar, international oil price was about 55 and 70 US dollars per barrel, currently we are at 90 US dollars per barrel for oil, the exchange rate did pick up to about 20 to 21 thought now is tempering down to about 17 US dollars,” he said.
Mr. Mwila said to hold the distortion, the government in January 2020 removed excise duty on petrol from K2.07 ngwee to 64 ngwee and reduced further Value Added Tax (VAT) on petrol by K2.45 ngwee bringing the total reduction of K3.86 ngwee on petrol.
On diesel, the government then reduced excise duty from 66 ngwee per litre to zero and VAT which was about K2.81 ngwee was removed, he explained.
He said this means that the fuel price that the country has been enjoying in the last two years didn’t have the component of VAT and excise duty. For petrol about K3.08 ngwee and almost K2. 50 ngwee for diesel was not passed on to consumers in the last two years.