PARLIAMENT on Wednesday raised alarm over the high price of ethanol on blended petrol saying the component was doing more harm than good as it effectively triples the final retail price of petrol which has been pegged at US$1.28.
The price of ethanol per litre of petrol is, however, drastically lower on petrol charged in Zimbabwe dollar.
Ethanol is part of about 20 items that energy regulator, Zera, uses in its formula to calculate the final retail price of petrol.
Energy minister Fortune Chasi said the purpose of blending had been largely misunderstood, adding Zimbabwe blends its petrol with ethanol as a foreign currency saving measure.
Parliamentarians argued that the price of blend should be lower than in countries which do not blend their fuel.
In a recent schedule released by Zera the ethanol component per litre of fuel was pegged at US$1.10 for petrol sold in United States dollars and about ZWL0.4cents for petrol sold in Zimbabwe dollar.
“As I indicated in my earlier response, the purpose or the idea behind blending with ethanol is to reduce the amount of foreign currency that we expend as a country importing fuel,” Chasi said.
“I have also made it clear that the blending takes place in one place. It is not as if we have service stations that procure petrol separately from the system that comes all the way from Beira into this country. As a result, it is not separable. The crux of the matter is that the country is making every effort to reduce the amount of foreign currency that is being used to import fuel.”
“I think our challenge is on the area of foreign currency shortages which are known to all of us and they do not need any further elaboration from myself. It is not possible to give the choice that the Hon. Member is asking for. Infact, one would say if ethanol on its own would run our vehicles as locally produced, that would be a better option and so I do not buy the idea by the Hon. Member that we should have a separation or people should choose. We do not have that luxury at the moment in this country. We need to reduce the amount of money that we are using for import. Import substitution is a key factor in this respect,” Chasi said.
The price of diesel and petrol when it is landed in Zimbabwe is 40,36USc for a litre of diesel and 37,76USc for a litre of petrol.
The price comes to ZWL$29,109 a litre for diesel and ZWL$27,62 a litre for petrol after the weighted average generated by the auctions.
The final combined taxes are ZWL$18,7 for diesel and ZWL$27,932 a litre for petrol.
Petrol is then blended with ethanol, 20 percent ethanol at a cost of ZWL$4,5763.
The price of fuel now stands at ZWL$62,77 for a diesel litre and ZWL$71,62 a litre for petrol after storage and handling costs.
Mbizo MP Settlement Chikwinya (MDC Alliance) had ignited the debate.
“Minister the price of ethanol which is one of the components you have listed on the cost build up structure is currently approximately three times the price of petrol FOB. So before petrol lends into Zimbabwe, it is a third of the price of ethanol in Zimbabwe,” he said.
“Why then do we have a mandatory blending? Why are we not giving consumers a choice whether to have blended petrol and then I consume at your structure or I do not have blended petrol and I remove the cost of ethanol which is currently three times the price of petrol as it is outside our borders?“
His sentiments were dissmised by Chasi.
MDC legislator for Dzivarasekwa Edwin Mushoriwa why the price of blend was higher than in countries which do not blend their fuel.
Chasi said the price of fuel is not about ethanol only but included various components.
“Firstly, we have customs duty when importing the fuel but before we get there we have FOB, the ZINARA road levy, carbon tax, fuel marking, debt redemption and the strategic reserve levy,” he said.
“What we are saying, is we want to collect all the fuel that we hold as Government in anticipation of shortages. There are also administrative costs which include the handling of fuel and also storage. All those have their own charges. When fuel is being imported there are clearing agents who need to be paid for it to be sold to the citizens of Zimbabwe. The Honourable member has asked a pertinent question about ethanol. There are blending costs which are there and there is also the charge for buying the ethanol. All those are incorporated into the final price.“
He added: “After all that has been done, the fuel has to be transported to various places in Zimbabwe. There is inland bridging cost…In fact, there are other margins like oil company margins and dealer margins which are also incorporated in there till we get to the final pump price.”
Chasi said he would inform Cabinet that Parliamentarians had requested a reduction in taxes and ethanol which were taking up a huge part of the fuel price for the final consumer.