Tanzania removes contentious Sh382/kg charge on Compressed Natural Gas as Parliament endorses Finance Bill, 2024

Dar es Salaam. The government has removed the Sh382 per kilogram for Compressed Natural Gas (CNG) as it adopts lawmakers’ views on how the proposal would jeopardize efforts to convert more and more vehicles from the expensive petroleum to the affordable natural gas.

Presenting the Sh49.35 trillion budget on Thursday, June 13, Finance minister Mwigulu Nchemba proposed the amendment of the Road and Fuel Tolls Act, CAP 220, to accommodate the new charge.

The collected revenue, Dr Nchemba said, was to be channelled into the Road Fund.

But the proposal did not go down well with Members of Parliament and the general public who said the proposal would see the price of a kilogramme of CNG rising to Sh1,932 from Sh1,550.

And, debating the Finance Bill, 2024, which was endorsed by the Parliament on Thursday, June 27, 2024, MPs received the decision positively.

The chairman of the Parliamentary Budget Committee, Oran Njeza, said since the beginning of the debate on the 2024/25 government budget, MPs have been complaining about the tax, arguing that it hinders Tanzanians' efforts to switch to locally available natural gas.

Njeza said though the committee agreed with the government's proposal to redirect windfall profits towards the Road Fund, it still disagreed with the introduction of the Sh382 tax per kilogram of natural gas used in vehicles.

He said the committee reached the decision considering that the gas sector was still nascent and slowly growing in the country.

So far, it has not been fully utilized due to the high costs of installing gas systems and a lack of refueling stations.

Commenting on the decision, an Associate Professor of Development Economics at the University of Dar es Salaam, Dr Abel Kinyondo said the decision to withdraw was significant and positive because Tanzania has signed the Paris Agreement to reduce carbon dioxide in the atmosphere.

According to him, the CNG was among the energies that reduce polluted air, saying imposing the tax would discourage people from switching to it [the CNG].

“The tax was placed in an area that is contrary to the country's strategies,” he stressed.

Meanwhile, a financial expert, Dr Donath Olomi also applauded the government for the decision, saying after all, it was only a few people who have started using CNG.

"CNG is still in its expansion phase, with inadequate infrastructure and a majority of people yet to start utilizing it. Taxing it will ultimately discourage people from using it," he said.