Fuel transporters get 15% subsidy increase

The mines and energy ministry recently confirmed that, as of 3 July, fuel transporters have received a 15% increase in subsidies to deliver fuel to remote filling stations across Namibia.

The executive director of the ministry, Penda Ithindi, said in response to enquiries by Republikein, Namibian Sun's sister publication, that this increase will remain in place until it is reviewed in line with inflation, most likely in a year's time.

He explained that government assists fuel transporters with a subsidy for the delivery of fuel by road, covering the transportation costs of fuel from price depots at distribution points where fuel trains stop (railheads) to remote towns.

He explained it is the government's role to ensure security of fuel supply and to maintain a comparable cost of fuel in the country.

"Therefore, someone who lives in a rural or far-outlying area should not pay a higher price as a result of transporting fuel to the final destination," Ithindi said.

Fuel is transported by rail from the Port of Walvis Bay to several of these points.

The active distribution points currently include Ondangwa, Otjiwarongo, Tsumeb, Windhoek, and Walvis Bay, while those in Gobabis, Keetmanshoop, Karasburg, Mariental, Oranjemund, Lüderitz, Okahandja and Otavi are not operational, he said.

Energy fund

Where fuel is transported by rail to the relevant price depot, the cost is included in the fuel price that consumers pay at the pump.

"A fuel distributor transports fuel from the pricing depot/railhead to the far-off destination, for example, from Grootfontein to Rundu, at their own cost over a period of 30 days. And thereafter, is reimbursed by the government, through the National Energy Fund (NEF), after a full calendar month, at a set rate,” Ithindi said.

According to Ithindi, the NEF levy applies to fuel prices for every litre sold in the country, and the subsidy for road transport of fuel is included within this levy.

Rail infrastructure challenges

Sem Nyambali, the chief administrative officer of NEF, said it would be ideal if fuel were transported by rail from Walvis Bay to all these distribution points, but cited outdated infrastructure and derailments as some of TransNamib's challenges.

Fuel distributors travel long distances at their own cost before NEF compensates them at a rate calculated based on the distance from the price depot, such as from Keetmanshoop to Aus, he explained.

Currently, towns such as Uis, Omaruru and Karibib are supplied from the Walvis Bay price depot at subsidised rates of 37.8 cents per litre, 46.5 cents per litre and 34.9 cents per litre, respectively.

These rates are calculated based on distance, with fuel for Betta, located between Sossusvlei and Gibeon, transported from Walvis Bay at a rate of 72.6 cents per litre to cover a distance of between 461 km and 480 km.

From the price depot in Gobabis, the cost to supply Otjiwarongo Post 11 is subsidised at 26.16 cents, while the cost for Talimanis, more than 200 km away and the furthest active distribution point from Gobabis, is supported with a subsidy of 34.87 cents per litre.

From Grootfontein, fuel trucks travel nearly 850 km to Bukalo, with a subsidy rate of 127.7 cents per litre.

From Keetmanshoop to Rosh Pinah, about 390 km of transport costs are subsidised at 61 cents per litre.

Nyambali admitted that fuel giants currently partially subsidise the transport of fuel from Walvis Bay to operational price depots, but said procurement contracts between fuel stations and oil companies enforce this.

"Fuel station owners cannot use another supplier," he explained.