Martin Kadzere-Senior Business Reporter
GREEN Fuel, Zimbabwe’s sole producer of blending ethanol, says it has capacity to meet demand on the domestic market in line with the new fuel blending levels announced by the Government recently.
Zimbabwe resumed petrol blending on April 25 this year at E10, which will be scaled to E20 at the end of this month as part of measures to lower domestic prices and ensure the availability of the commodity amid uncertainties due to the ongoing conflict between Russia and Ukraine.
There were concerns in certain quarters the immediate spike in ethanol demand could lead to supply shortfalls, with some analysts suggesting tax breaks would guarantee fuel price stability in the long term.
Barring adverse weather conditions, such as heavy rains, which normally result in inaccessibility of cane fields by the machinery, “we are more than prepared to satisfy the market,” a senior official said.
“We have just completed upgrading our crushing capacity and I can assure you that the supplies would be more than adequate to meet the demand in line with new blending needs.”
The increase in fuel prices has largely resulted from the increase in oil prices. Russia’s strategic military operation in Ukraine is seen as “the catalyst to push higher”, according to some reports, but prices were already on the move ahead of the war. Russia is the largest oil and natural gas exporter in the world.
Addressing a post-cabinet media briefing on Tuesday last week, Information, Publicity and Broadcasting Services Minister Monica Mutsvangwa said raising fuel blending levels was among the measures the Government had put in place to stabilise the prices.
The effect of a fuel price increase feeds through the supply chain by affecting the price of goods and services, which is inflationary. Minister Mutsvangwa said the blending of petrol at E 10 had resulted in the reduction of petrol price by 4 US cents per litre while blending at E20 will reduce the price by 7 US cents per litre.
The Government stopped the mandatory blending of petrol in January this year.
The Government is also working on improving the strategic fuel reserve, with US$40 million worth of fuel having been procured in the last six months. “The intention is to maintain at least a 30-day stock cover, which, at the current consumption levels, translates to 150 million litres. This fuel would be released onto the market to plug supply gaps or to stabilize prices,” said Minister Mutsvangwa.
The Government will also establish a fuel price stabilisation fund to cushion consumers from sharp price increases and discussions were ongoing on the modalities of establishing the fund. “The Government will come up with (more) measures to stabilize and ensure a consistent supply of fuel,” said the Minister.
Economist professor Gift Mugano said while the Government’s move to raise blending levels was “strategic”, it might not be sustainable in the short to medium term.
“I think the most effective way of tackling the Russian/Ukraine crisis, which is feeding into our country through cost pushing inflation, in particular, high cost of fuel…is to look at the taxes, which we are collecting as a country,.
“Increasing the blending ratio is a good move, but its shortcoming is that we may not have enough supplies. We should pay more attention to the taxes which we collect as a country. For example, duty on petrol and diesel is 30 US cents per litre. I would advocate that if the Government takes a knock even to collect US10c and shed out 20 US cents; that will go a long way in reducing the cost of fuel and inflationary pressures. In the same vein, taxes such as a road levy, which is 2 US cents and strategic reserve which is 4 US cents for diesel and 12 US cents for petrol may need to be knocked off as a temporary measure.
“For example the road levy, we are already collecting that through ZINARA through the toll gates; so it’s kind of a double collection,” Professor Mugano added.
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