Transnet has asked for a 74 percent tariff increase to fund a new multi-products pipeline, it said on Wednesday.

It had asked the National Energy Regulator of South Africa to adjust the petroleum pipeline and storage tariffs, Transnet said in a statement.

A significant revenue increase was needed to cover costs and raise the necessary debt finance to construct the pipeline, which was urgently required to meet growing demand for fuel in the inland market.

Transnet said that given Nersa's present tariff methodology, this would mean an increase of about 10 cents a litre between Durban and Gauteng.

The actual increase and impact on other routes would vary, depending on the zone in which the fuel was purchased.

Transnet said fuel transportation costs -- estimated at 3.1 percent after the proposed tariff increase -- constituted a small part of the overall price of fuel.

Spokesman John Dludlu said that as a self-funding company with no state guarantees or subsidies, Transnet had to raise capital on the strength of its balance sheet.

Transnet planned to invest R12bn in the building of the pipeline and associated infrastructure between Durban and Gauteng.

This would form the backbone of fuel supply infrastructure to Gauteng and other parts of the inland market for the next 50 years.

Dludlu said the investment would increase Transnet Pipelines' asset value by more than four times, but that the next two years of construction and the first two years after the commissioning of the pipeline would result in high financial risk to Transnet.

He said the shortfall of funds even after the proposed revenue increases, cumulatively amounted to R9.5bn by 2010/11, which had to be funded by borrowings.

This was significant in the global economic crisis, which had made borrowing extremely difficult and increasingly costly.

"It is essential that Transnet's funders, rating agencies and the Board of Directors have relative certainty on the pipeline cash flows," said Dludlu.

He said the new infrastructure would be operational in the third quarter of 2010.