State to make Sh18.6bn in taxes from fuel this months

This, as industry players call for a revision of pricing module.

In Summary

•According to the Motorists Association of Kenya , the country can consume up to 20 million litres of petrol and diesel every day.

•The government is getting an average Sh621.3 million from fuel sold every day, with annul taxes from fuel being in excess of Sh200 billion.

An attendant fueling a car/FILE
An attendant fueling a car/FILE

The government will make at least Sh18.6 billion from fuel taxes by the time the next price review is due, as Kenyans continue to decry high pump prices.

This comes as industry players and consumers call for a reversal of the fuel price calculation formula used by the Energy and Regulatory Authority (EPRA), amid other changes.

The monthly revenues are on the average consumption of 150 million litres of Super petrol per month, 200 million litres of diesel and about 15 million litres of kerosene consumed on average, per month according to EPRA data.

It puts daily consumption at an average five million litres of petrol, Diesel(6.6 million litres) and Kerosene (500,000 litres), meaning the government is getting an average Sh621.3 million from fuel sold every day, with annul taxes from fuel being in excess of Sh200 billion.

This can however go higher or lower mainly depending on economic activities which have in recent times been disrupted by the pandemic.

According to the Motorists Association of Kenya , the country can consume up to 20 million litres of petrol and diesel every day.

Under the new retail prices announced by EPRA on Tuesday, taxes on Super petrol, commonly used by motorists, have gone up to Sh58.81 a litre from a total Sh56.42 per litre in March this year.

Taxes on diesel, which is widely used in the transport, agricultural sector and electricity generation, are 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, with Kenyans paying nine different taxes and levies.

Pump prices in Nairobi are currently at Sh134.72, Sh115.60 and Sh110.82 for a litre of super petrol, diesel and kerosene, respectively.

Excise duty takes the lion's share of Sh21.95 of every litre of petrol followed by the Road Maintenance Levy (Sh18).

Value Added Tax has gone up from Sh8 to Sh9.98 while Petroleum Development Levy is at Sh5.40, having been increased from a previous 40 cents per litre.

Other levies included in the fuel pricing are Petroleum Regulatory Levy, Railway Development Levy, Anti-adulteration Levy, Merchant Shipping Levy and the Import Declaration Fee.

The final pump prices also include the cost of importing, bulk handling charges, pipeline and storage costs.

Oil Marketing Companies then add a margin of Sh12.39 which has been revised upwards from Sh8 in the past three months, when government moved in to stabilise fuel prices by compensating the retailers.

Yesterday, the Motorists Association of Kenya called for a reversal of the formula used in coming up with the maximum market prices, saying it has lost the intended purpose of stabilising fuel prices in the country.

This, as an uproar continues over prices which have hit a historic high, despite moderate global crude oil prices and a drop in landed cost recorded last month.

“Initially ERC (Energy Regulatory Commission) used to do it well but it is a different case with EPRA . It is not serving the purpose. Instead, Kenyans are now being milked dry under the formular where taxes are increased every day,” chairman  Peter Murima told the Star on the telephone.

The Consumer Federation of Kenya has also questioned the Petroleum Development Levy's use, saying it has failed to serve its purpose.

“Only in Kenya that government will take your Sh5.40 per litre to stuff into a mysterious escrow account in the name of hedging and potential subsidy, only to slap you with an increase of fuel products,” Secretary General Stephen Mutoro said.

According to Mutoro, the National Assembly should stop the Fuel Development Levy Fund and “halt the Ministry of Petroleum micro-managing the EPRA” and place a consumer representative on the regulator's board.

ANC party leader Musalia Mudavadi on Wednesday called on the government to use the stabilisation fund to cushion Kenyans from rising fuel prices.

“The government must understand that this is not the time to push the resilient Kenyans to the edge of the cliff,” Mudavadi said, noting the Covid pandemic has ravaged households.

Both transporter, manufacturers and electricity producers have warned of an increase in prices and costs of goods and services as they pass expenses to end users.

“The increase in the price of fuel will result in more pain for consumers who are already struggling to make ends meet,” KAM chief executive Phyllis Wakiaga said.

In the latest review, EPRA director general Daniel Kiptoo said : “The prices are inclusive of the eight per cent Value Added Tax (VAT) in line with the provisions of the Finance Act 2018, the Tax Laws (Amendment) Act 2020 and the revised rates for excise duty adjusted for inflation as per Legal Notice No. 194 of 202,”

The transport sector is the largest consumer of petroleum products followed by manufacturing, agriculture and power generation respectively, according to EPRA.