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Fuel prices drop as Treasury releases Sh24 billion subsidy

The exchequer had used the fund to support SGR operations, triggering high prices last month

In Summary
  • The regulator also announced Sh5 cut on a litre of Super Petrol and diesel despite the landed cost for the two products increasing.
  • Price per a litre of kerosene has been cut  by Sh7.28 while that of petrol and diesel has dropped by Sh5
An attendant fueling a car/FILE
An attendant fueling a car/FILE

The National Treasury has released Sh 24 billion from the Petroleum Development Fund to bring down fuel prices in the latest review.

“The government will utilise the Petroleum Development Levy to cushion consumers from the otherwise high prices,” EPRA director-general Kiptoo Bargoria said in a statement on Thursday afternoon.

Yesterday, the majority of low income households in the country that heavily rely on kerosene as a source of energy were the main beneficiaries after the Energy and Regulatory Authority (EPRA) cut the price per litre by Sh7.28.

The regulator also slashed  Sh5 cut off a litre of Super Petrol and diesel despite an increases in global prices. 

According to EPRA, the landed cost for petrol increased by 1.71 per cent from $548.36 per cubic metre in August to $557.74 in September.

Diesel increased by 3.10 per cent from $489.51 per cubic metre to $508.68.

The cost of importing kerosene, however dropped by 4.1 per cent to $477.75 from $498.19 per cubic metre.

 The new prices that took effect Thursday midnight will see petrol users in Nairobi pay Sh129.72 per litre, Sh110.60 for diesel and Sh103.54 for kerosene.

Those in Mombasa will this month pay  Sh127.46 for a litre of Super petrol, Sh108.36 for the same quantity of diesel and Sh101.29 for kerosene.

This is a reprieve to consumers who have in the past 30 days paid up to Sh135 for a litre of petrol, generally pushing up the cost of living.

Both EPRA and Petroleum CS John Munyes accused the exchequer of delays in releasing the Petroleum Development Fund, a move that saw a litre of petrol, diesel and kerosene increase by Sh7.58, Sh7.94 and Sh12.97, respectively.

“Out of the Sh32 billion from the Petroleum Development Fund, we spent Sh8.6 billion in the five months to stabilise fuel prices. We did not receive any money in September,” Munyes told the Senate Energy Committee.

The subsidy scheme, supported by collecting Sh5.40 a litre from July last year, was depleted in August after the State used Sh3.8 billion to upgrade infrastructure in the energy sector and Sh18.1 billion to support Standard Gauge Railway (SGR) operations.

This incident saw Members of Parliament embark on a campaign to revoke the fund citing a lack of accountability in the implementation of the levy.

Late last month, the National Assembly Finance committee led by Homa Bay Woman Representative Gladys Wanga raised concerns that the taxpayers have been contributing to the fund on an illegal basis.

The committee further seeks to reduce the Value Added Tax (VAT) charged on petroleum products from eight per cent to four per cent in a bid to cut on high taxes that accounts for over 50 per cent of pump prices. 

Last week, they asked the National Treasury to prepare supplementary estimates to adjust the Sh22.6 billion arising from the intended tax measure. 

Consumers in Kenya are paying up to Sh19 more for a litre of petrol compared to their East African neighbours of Tanzania, Uganda and Rwanda due to the heavy tax regime.

Motorists and transporters are paying more than double what their counterparts in Addis Ababa are paying, where a litre of petrol and diesel are retailing at an equivalent of Sh51.28 and Sh44.66, respectively.