THURSDAY, 11.30AM:
THE government is scheduled to meet synthetic fuel producer Sasol this week, where it is expected to propose cutting its tariff protection in the synthetic fuel industry. Current low fuel prices have pushed the cost of maintaining the subsidies up to an astronomical R3-million a day.
In terms of a formula agreed to by Cabinet in 1995, synthetic fuel producers Mossgas and Sasol receive a subsidy — calculated as the difference between the agreed floor price and the oil price — should the oil price fall below the $17,33 a barrel floor price.
The two firms together produce the equivalent in synthetic fuel of some 200000 barrels of crude oil a day. With the subsidy now standing at around $4 a barrel, R3-million a day, the government is rapidly draining its equalisation fund.
In its March Budget review, the government anticipated the equalisation fund, then standing at R833-million, will only last until the end of March 1999.
Further cuts in the fuel price, however, mean the fund could run dry as early as December, forcing the government to cut the massive subsidies, or increase the fuel levy.
The levy is currently 4c a litre of petrol, netting R80-million a year from motorists.
Sasol on Wednesday played down the significance of this week’s planned meeting, however, saying contact with the government is merely routine.