Cooking gas dealers ride on VAT to charge higher prices

Households paying an extra of up to Sh700.

In Summary

•Most are said to be taking advantage of the 16% VAT on LPG.

•The Consumers Federation of Kenya (COFEK) has faulted Parliament for raising the cost of living by escalating the tax on cooking gas, fuel and other essential foodstuffs.

LPG gas cylinders.
LPG gas cylinders.
Image: FILE

Cooking gas prices have increased by up to 31.8 per cent, a spot check by the Star shows, as dealers cash in on the 16 per cent VAT on Liquefied Petroleum Gas.

The Finance Bill assented to by President Uhuru Kenyatta on June 30, removed LPG from being zero rated to taxable under the Value Added Tax regime(VAT).

This is a consumption tax placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale.

The price increase varies according to brands. A 13-kilogramme cooking gas sold by Total is currently retailing at up to Sh2,900 in most Nairobi estates, up from Sh2,200, an increase of up to Sh700 which is double the Sh350  when VAT is calculated on the initial price.

Pro Gas 13-kg is selling at an average Sh2,400 up from Sh2,000 which it has averaged for the last two months.

VAT calculations puts the increase at Sh320. A six kilograme of the same brand is going for between Sh1,300 and Sh1,500 at the local dealership, up from Sh1,000.

“We can't be blamed for the increase. We place our margins depending on the prices we get the product and this has been on the rise for the past three months,” Enock Mwangi, a gas dealer in Roysambu said.

There is a threat of rising illegal cooking gas refilling business in the country experts have warned. 

This comes with the increase in excise duty on imported LPG cylinders which went from zero to 35 per cent.

According to the Petroleum Institute of East Africa (PIEA), this has made it expensive for first time consumers of LPG to invest in gas cylinders.

On Monday, the  Energy and Petroleum Regulatory Authority (EPRA) published nine facilities found undertaking illegal LPG activities in the country.

EPRA said the listing followed random surveillance and enforcement exercises undertaken between April and June 2021, with a view to enhancing consumer safety.

The nine non-compliant facilities are City Gas Limited, Green Energy Limited, More Gas Limited, Eco-Energy Limited, Topline Traders Limited, Salama Gas Limited, Valley Gas Limited, Moto Gas Limited and Kofurow Gas Limited.

Yesterday, PIEA warned that making cooking gas expensive would negatively affect the economy, environment and health.

"Local manufacturing of LPG cylinders will be reversed or remain stagnant as reduced demand of cooking gas will mean reduced demand of LPG cylinders and with it reduced employment and entrepreneurship opportunities mainly for the youth," PIEA General Manager Wanjiku Manyara said.

While Kenya's LPG growth action targets to increase cylinders to 18 million by 2030 from the current 4.5 million, this will not be met if the cost of LPG is distorted, she added.

Many Kenyans will also be forced to fall back to other sources of energy, PIEA  said.

“More than 8,649 children will continue to die annually of preventable pneumonia because of inhaling toxins from smoke as their mothers cook with charcoal and firewood. These children will get sick and die before they celebrate their fifth birthday,” Manyara said.

President Uhuru Kenyatta's pledge to the World (on April 21, 2021) that Kenya was on course in converting 100 per cent Kenyans using firewood, charcoal and kerosene to LPG by 2028 will be a pipe dream as it will be completely derailed, PIEA said.

A recent study published by the Ministry of Energy ( 2019) shows that 93.2 per cent of the rural population still rely on solid fuels as their primary fuel source.

The Economic Survey 2019 indicates that indoor air pollution from cooking fuels like charcoal and firewood is killing an estimated 21,600 Kenyans annually, with 40 per cent being young children and infants.

The Consumers Federation of Kenya (COFEK) has faulted Parliament for raising the cost of living by escalating the tax on cooking gas, fuel and other essential foodstuffs.

No amount of or over-taxation and over-borrowing will revive the economy but fighting graft, cutting wastage and fighting illicit trade and tax evaders will do, Secretary General Stephen Mutoro said.

“We expect President Kenyatta to request parliament to review the Finance Act and ease the cost of living especially by dropping added taxes on cooking gas, fuel and essentials foodstuffs,” Mutoro said on telephone.

The Energy and Petroleum Regulatory Authority (EPRA) which set monthly prices for key petroleum prices is yet to make any move to cushion households, who have for years been manipulated by dealers on LPG products.

It however says:“LPG prices are very competitive at the moment. If there are signs of market failure, the authority will not hesitate to control LPG prices.”

In a suit filed at the High Court through Okoth & Co. Advocates, the Energy Dealers Association (EDA)  argues that introduction of the tax  on LPG will directly increase the cost of living, as it is a basic commodity required daily, forcing consumers to avoid its use.

The introduction of the VAT has also been opposed by a private citizen, Oscar Okumu, who on Monday moved court challenging its implementation.

Okumu argued that the 16 per cent VAT is likely to create a ripple effect as it will not only increase the prices of commodities but also strain the environment.