Stiff penalties for errant fuel firms

Source: Stiff penalties for errant fuel firms | The Herald January 14, 2019

Stiff penalties for errant fuel firmsPresident Mnangagwa

Herald Reporter
Owners of oil companies and service stations that cheat in buying or selling fuel face heavy penalties under new regulations gazetted at the weekend which also show that almost all the fuel price increase is accounted for by a five-fold rise in duties rather than allowing parallel pricing. Those caught cheating risk fines and five-year jail terms.

The package of fiscal and regulatory measures announced by President Mnangagwa on Saturday was captured in two statutory instruments published in an Extraordinary Government Gazette dated the same day: The Petroleum (Petroleum Products Pricing) Regulations, 2019, made by Energy and Power Development Minister Joram Gumbo and the Customs and Excise (Tariff) (Amendment) Notice, 2019 (No. 7) made by Finance and Economic Development Minister Prof Mthuli Ncube.

The Customs and Excise Notice raises the duty on petrol from 45c/litre to $2,31/litre and the duty on all diesel and paraffin from 40c/litre to $2,05/litre. These fiscal measures account for more than 90 percent of the rise in retail prices for fuels and were designed to counter economic and market forces that encouraged widespread cheating that saw Zimbabwe’s consumption of petrol and diesel nearly doubling from June last year without explanation.

That cheating could have cost the country more than $250 million in scarce foreign exchange.

The new retail prices of $3,31/litre for petrol and $3,11/litre for diesel keep the 1-1 ratio between RTGS payments and foreign currency, with the Reserve Bank of Zimbabwe continuing to allocate forex for fuel procurement.

It was also announced at the weekend that US$20 million had been allocated to buy 44 million litres of fuel. Yesterday there was heavy tanker traffic from the Msasa depot and many fuel stations got deliveries.

The President also announced on Saturday that “all registered business entities in manufacturing, mining, commerce, agriculture and transport sectors” will be granted tax rebates, making it possible for them to continue supplying goods at the old price and not having to factor in higher fuel bills when calculating costs. The rebates are possible because the bulk of the new prices are made up of taxes.

Under the Petroleum Regulations, the Zimbabwe Energy Regulatory Authority (Zera) will set petrol and diesel prices weekly in terms of set formulas.

Under the formula for each fuel, the starting point is the FOB price. This is the actual foreign currency cost to Zimbabwe and is set as the average of the purchase price in the third and fourth weeks before the week the price is set.

On top of the FOB price is the pipeline charge to Msasa, 10,5c a litre. Taxes and levies absorb another $2,482/litre for petrol or blend and $2.11/litre for petrol. Most of this is the new duties along with charges for the Zinara road levy, carbon tax, debt redemption and the Strategic Reserve Levy. Administrative costs take another 3,1c/litre to give the landed cost at Msasa.

Distribution costs add another 8.8c a litre for both fuels (this covers the road tanker costs). Profit margins are 10c/litre for oil companies and 15c/litre for service stations to give the final pump price. Service stations and other licensed sellers outside the main depots can work additional transport costs depending on distance up to a maximum of 7,95c/litre and that is only on distances over 1000km from a main depot.

The regulations increase penalties for cheating.

Anyone selling petroleum products above the recommended wholesale or retail price can be jailed for five years or fined at level nine, or be fined and jailed, and all petroleum products would be forfeited to the State. Under the regulations, Zera must close down any retailer immediately pending prosecution, at least as far as fuel sales are concerned. That means a cheating service station owner cannot stay in the main business while on bail awaiting trial.

Identical penalties for compulsory closure apply to any retailer or service station that fails to display the prescribed prices in a prominent place and on each fuel pump.

Investigations revealed last night that a level nine fine is $600 but it was noted that a service station that overcharged 200 customers in a sales session could then be fined that for each offence, for a total of $120 000 for a day’s cheating.

All retailers and service stations are required to issue receipts on request showing the price of the petroleum product, the quantity and the total sales charge. Anyone refusing to issue the receipt can be fined at level five or jailed for two years. Level five fines were ascertained last night at $200 an offence. Such receipts would give proof of price cheating.

The regulations now make it an offence to withhold petroleum products ordinarily meant for sale without good reason. “Any person who withholds any petroleum product shall be guilty of an offence and shall be liable to pay a fine of up to level nine or imprisonment for a period not exceeding five years or both such fine and such imprisonment.” This regulation criminalises a tendency by service stations to hoard fuel.