Oil re­fin­ers thrown a bone

CityPress - - Business - – De­wald van Rens­burg

Oil re­finer­ies have been given the first in­di­ca­tion of how govern­ment plans to sub­sidise the long-de­layed upgrade to pro­duce cleaner fuel lo­cally. In be­tween the list of tax pro­pos­als in this year’s bud­get is a spe­cial pro­posal for oil com­pa­nies that own six lo­cal re­finer­ies.

The re­finer­ies face an upgrade bill that they claim would be as high as R40 bil­lion. This will al­low South Africa to catch up with fuel stan­dards abroad by pro­duc­ing “Euro 5” diesel with very low sul­phur con­tent.

The SA Pe­tro­leum In­dus­try As­so­ci­a­tion (Sapia) has been call­ing for full cost re­cov­ery. It wants govern­ment to put a new levy on liq­uid fu­els and make mo­torists pay for the up­grades – prob­a­bly in the range of 20c per litre.

Trea­sury has, how­ever, been pump­ing up the fuel levy to fund the govern­ment bud­get (30c this year and 30.5c last year). The levy in­crease will give Trea­sury an ex­tra R6.8 bil­lion.

Trea­sury is seem­ingly push­ing ahead with an al­ter­na­tive mech­a­nism for the re­finer­ies: a spe­cial ac­cel­er­ated de­pre­ci­a­tion al­lowance that al­lows them to write off the upgrade costs against tax­able in­come over only three years, which ef­fec­tively means they pay lit­tle tax in those years.

“The pro­posal by Na­tional Trea­sury is a wel­come de­vel­op­ment,” said Sapia spokesper­son Avhap­fani Tshi­fu­laro.

“At this stage, we can­not fully com­ment on the pro­posal since we have not had an op­por­tu­nity to prop­erly look into it.” He sug­gested the al­lowance wouldn’t help much, though. “It must be re­mem­bered that the scale of in­vest­ment is large rel­a­tive to the in­come re­fin­ers will re­ceive ... mean­ing that the as­sessed loss will re­main for a good num­ber of years af­ter the plants have been com­mis­sioned,” he said.

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