IMPACT

Cost of goods, power, transport to rise on fuel price hike

Kenyans should also expect a jump in electricity charges, generators say.

In Summary

•EPRA on Tuesday announced new prices for the next 30 days where pump prices have hit a historic high.

•The rise is as a result of increased taxes on all the three products notably VAT, which has gone up to 9.98 per cent on petrol from eight per cent.

Customers shop at a supermarket/FILE
Supermarket Customers shop at a supermarket/FILE
Image: Reuters

Expect the cost of goods, transport and electricity to rise, industry players have warned, as they move to pass operational expenses to consumers.

This is in the wake of the sharp rise in fuel prices announced on Tuesday, which have hit a historic high.

The rise is as a result of increased taxes on all the three products notably VAT, which has gone up to 9.98 per cent on petrol from eight per cent.

This has pushed taxes on Super petrol, commonly used by motorists, to Sh58.81 a litre from a total Sh56.42 per litre in March this year.

The government has also increased taxes on diesel, which is widely used in the transport, agricultural sector and electricity generation, with a litre now attracting a total of Sh46.46 in taxes, up from Sh44.79.

A litre of kerosene, which is common in low income households for cooking and lighting, now attracts taxes totalling Sh41.14.

In the latest price review by the Energy and Regulatory Authority (EPRA) on , the prices of a litre of petrol, diesel and kerosene increased by Sh7.58, Sh7.94 and Sh12.97, respectively.

A litre of petrol in Nairobi is now retailing at Sh134.72 , Sh115.60 for diesel while a litre of kerosene goes for Sh110.82.

“The prices are inclusive of the eight per cent Value Added Tax in line with the Finance Act 2018, the Tax Act 2018, the Tax Laws(Amendment) Act 2020 and the revised rates for excise duty adjustment for inflation,” EPRA director general Daniel Kiptoo said.

The increase comes despite lower global crude price in August which averaged $70.75 a barrel, down from $75.17 in July, and a drop in the landed cost of fuel at the Port of Mombasa.

Consumers in the country pay at least nine different taxes on fuel products which constitute the biggest share of final pump prices. 

Under the new prices, Oil Marketing Companies’ margin has been reinstated to Sh12.39 from Sh8 in the past three months, when the government shouldered the difference to try and cushion consumers.

Efforts to stabilise fuel prices have however not cushioned consumers from the high cost of living in the country where inflation rose to an 18-month high in August, at 6.57 per cent.

Yesterday, transporters warned of a hike in fares, which has already been effected by some Public Service Vehicles operators in Nairobi.

“It is justified. We have gotten to where we have never been before. The costs will definitely be passed to the public,” Matatu Owners Association chairman, Simon Kimutai, told the Star on the telephone. 

He said the industry which had been brought to its knees by the pandemic is still making losses despite carrying full capacity, a situation worsened by the fuel price increase. 

Kenyans should also expect a jump in electricity charges, which are affected by an increase in fuel, mainly diesel.

“All aspect of generation is affected so it will go up,” an official at Kenya Power told the Star.

Manufacturers are equally expected to pass the cost of production to consumers which will see prices of goods go up.

Kenya Association of Manufacturers (KAM) said industries use fuel either directly in heating furnaces and transportation or indirectly through electricity consumption, where thermal plants use diesel-run generators.

“An increase in fuel cost will reflect directly on power bills. An increase in the cost of fuel will also result in an increase in the cost of transportation for raw materials and finished goods,” CEO Phyllis Wakiaga noted.

Farm produces are also expected to go up with diesel being a key input at both farm level and transportation to the markets.

The Consumers Federation of Kenya (Cofek) yesterday warned inflation is likely to go beyond the government’s 7.5 per cent target ceiling if fuel prices continue to rise, with a possibility of hitting double-digit.

“Kenya's opaque and unpredictable fuel pricing will continue to hurt the economy and strain potential FDIs into the country. The net effect is inflation shall immediately go up. Cost of food, transport, and production will be escalated,” Secretary-General Stephen Mutoro said.