Fuel levy is a fee which is charged on every litre of petrol and diesel imported into the country.
Fuel levy is the biggest source of revenue for the Roads Fund and it accounts for over 80% of the Roads Fund’s annual income. Effective 1st July 2015, the fuel levy calculation structure was changed from an absolute amount per litre to a percentage of the In-Bond Landed Cost (IBLC) – an indirect reference to the fuel pump price. The current fuel levy rates (effective 5th October 2018) are MK97.68 per litre for petrol and MK97.99 per litre for diesel.
The change was one of RFA’s approved reform areas aimed at safeguarding the Roads Fund against the risk of erosion in real value for the fuel levy as a result of depreciation of the Malawi Kwacha. Prior to the change, between 2009 and 2014, the fuel levy as a percentage of the pump price had shrunk from 11% in 2009 to as low as 4% in 2014. In dollar terms, the value of fuel levy had depreciated from 12 cents per litre to as low as 3 cents per litre. This was happening despite the ever increasing costs of road maintenance.
In addition to the change in the calculation structure, the Ministry of Finance, Economic Planning and Development further increased the fuel levy rate from 4% of pump price to an average of 11% of pump price as a clear demonstration of the Government’s resolve and commitment to close the maintenance funding gap.
The two changes have resulted in significant and steady fuel levy revenue increases. Annual fuel levy collections have increased from MK11 billion in 2014/2015 (before the changes) to MK20 billion in 2015/2016; and to MK27 Billion in 2016/2017 and to MK31 billion in 2017/2018 – a growth of 182% in the past three years.