RFA seeks fuel levy hike to boost revenues

November 01, 2023

The Road Fund Administration (RFA) says it is striving to tackle a hefty funding gap of N$3.6 billion in 2024/25 through a N$1 fuel levy increase. 

RFA’s Executive for Programme Management, Policy and Advice Namene Kalili said the company plans to submit a proposal to the Ministry of Finance and Public Enterprises to raise the fuel levy by N$1.

RFA highlighted that the current rate of N$1.78 per litre is well below the inflation-adjusted benchmark of N$2.58 per litre.

"A key component of this proposal is a substantial increase in the fuel levy. This is going to generate north of a billion dollars for us so we can close that funding gap and allocate more money to road maintenance," Kalili said at the 2023 Annual Business Plan Stakeholders Consultative Workshop.

Under the draft business plan there is a N$15 billion funding gap over the five-year draft business plan, Kalili revealed. 

Apart from the fuel levy, RFA proposed a 20% increase in mass distance charges, cross-border charges, and abnormal load fees, with a 10% increase for road carrier permits to meet this funding gap. 

Vehicle registration fees will remain unchanged due to their existing costliness.

RFA Chief Executive Officer Ali Ipinge shared that the company has set out a target of achieving a minimum of 70% of optimal funding to the road sector.

This comes as the RFA has increased its revenue by 16.5% from N$3.0 billion last year to N$3.4 billion (current 2023).

"This has led to funding 81% of the budget requests from approved authorities, reducing the funding gap to N$800 million for the current year. The five-year business plan anticipates a commitment of N$20.5 billion," he said.

Two years ago, the RFA proposed a three-step, 50-cent increase in the fuel levy for FY2022/23, FY2023/24, and FY2024/25.

Unfortunately, no adjustments were approved in the previous fiscal year.

In response to rising fuel prices, the RFA lowered the fuel levy from N$1.48 to N$0.74 per litre, causing a revenue loss of about N$350 million, said the CEO.

This loss was covered by the Road Fund's Reserve Fund, ensuring that funding commitments to all approved authorities were met. 

Ipinge noted that a recent study indicates that the fuel levy needs to reach N$2.98 per litre by 2026 to maintain the road network adequately.

He said the aggressive adjustment could add N$1.32 billion to the revenue, considering the country's current annual fuel consumption. 

Despite this, the funding gap is projected to widen to N$3.6 billion in FY2024/25, making it challenging to meet the road sector's funding needs.

The RFA has received funding requests totalling N$7.0 billion for next year's budget, with N$5.87 billion allocated for the National Road Network under the Roads Authority's supervision.

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Last modified on Thursday, 02 November 2023 17:52

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