IMPACT

Push for SGR use, fuel taxes add pain to Kenyans at the pump

Import Declaration Fee, VAT and Railway Development up.

In Summary

•The government is taking Sh62.89 per litre of petrol in taxes and levies, more than half the Sh104.05 it landed at the Port of Mombasa.

•The state also takes Sh51.65 per litre of diesel and Sh45.15 on kerosene, whose landed costs are Sh117.46 and Sh106.60 per litre, respectively.

Boda boda riders at a petrol station in Homa Bay, on March 31/FILE
JAMMED: Boda boda riders at a petrol station in Homa Bay, on March 31/FILE

Tax adjustments in government’s appetite for revenues continues to push Kenyans into expensive fuel, with global crude prices having a minimal impact.

Taxes and levies account for more than 50 per cent of the landed cost of petrol products at Mombasa, with the push to increase revenues on the Standard Gauge Railway (SGR) coming to haunt consumers in the country.

The Energy and Petroleum Regulatory Authority (EPRA) pricing data shows the government is taking Sh62.89 per litre of petrol in taxes and levies, more than half the Sh104.05 it landed at the Port of Mombasa.

The state also takes Sh51.65 per litre of diesel and Sh45.15 on kerosene, whose landed costs are Sh117.46 and Sh106.60 per litre, respectively.

Adding distribution costs, a litre of super petrol in Nairobi has now shot to Sh159.12 from Sh150.12, diesel Sh140 up from Sh131, while kerosene has increased to Sh127.94 from Sh127.94, prices that will remain in place until July 14.

“The prices are inclusive of the eight per cent VAT and revised rates for excise duty adjusted for inflation,” EPRA director, enforcement and consumer, protection directorate Cyprian Nyakundi said in a statement on Tuesday.

The authority has heavily pegged the rise on increased landed costs of imported super petrol which is notes increased by 5.96 per cent from $826.77 (Sh96,980) per cubic metre in April to $876.05 (Sh102,760) in May.

Diesel increased by 10.90 per cent from $899.36 (Sh105,494)per cubic metre to $997.35 (Sh116,989).

Kerosene prices have increased despite a decreased on landed cost by 0.34 per cent, from $908.66 (Sh106,585) per cubic metre to $905.60 (Sh106,226).

There is however upward adjustments on three of the nine different taxes and levies consumers pay in Kenya, as government seeks more revenues.

These are Import Declaration Fee (IDF) which has gone up to Sh3.5 per litre of petrol (calculated on the customs value of the goods imported into the country), from Sh1.81 last year.

A litre of diesel is now charged IDF at Sh 3.96 per litre up from Sh1.64 while importers are paying IDF at Sh3.60 per litre of kerosene, up from Sh1.55.

The government has also adjusted upwards VAT to Sh11.8 per litre of petrol, Sh10.37 for diesel and Sh9.48 on kerosene.

This is from Sh9.10, Sh7.97 and Sh7.25 last year.

In a move to push more business to the SGR and discourage road use by importers and exporters, the government increased the Railway Development (RDL) on fuel to Sh2 per litre from Sh1.04 on petrol, while diesel and kerosene are also attracting higher levies(Sh2.27 and Sh2.02 from Sh0.94 and Sh0.88).

Importers who choose to transport goods by road are paying higher levies compared the use of SGR, where they are paying slightly half the charges.

RDL is paid on all goods imported into the country for home use.

The purpose of the levy was initially for providing funds for the construction and operation of an SGR, which was funded through a Sh364 billion loan from China.

The country is currently struggling with a debt burden amid increased repayments for the SGR, with its operations still not bringing in enough revenues as targeted.

Meanwhile, excise duty at Sh21.95 per litre of petrol and Sh11.37 for diesel and kerosene continues to take the lion share of taxes.

Consumers in Kenya are also paying Road Maintenance Levy, Petroleum Development Levy, Petroleum Regulatory levy, Anti-adulteration Levy, and Merchant and Shipping Levy.

Pump prices are expected to rise further as the government moves to phase out the fuel subsidy kitty, which has been in place since last year.

Without the cushion, consumers would be paying Sh184.68 for a litre of petrol, Sh188.19 for diesel and Sh170.37 for kerosene, EPRA indicates in its latest review.

This means the government is compensating Sh25.56 per litre of petrol, Sh48.19 on diesel and Sh42.43 per litre of kerosene sold at the pump.

However, it remains the biggest taker in fuel trading in Kenya where taxes remain high.

A statement by the Exchequer on Wednesday stated that the fuel subsidies are inefficient and often lead to misallocation of resources and crowding out of public spending on productive sectors.

"This results in unintended consequences such as disproportionately benefiting the well-off. Even though scrapping off the plan will trigger a price hike, it will not be to the levels witnessed before Russia- Ukraine crisis,'' National Treasury CS Ukur Yatani said. 

He added that the cost of fuel subsidy could eventually surpass its allocation in the National Budget, thus potentially escalating public debt to unsustainable levels, hence disrupting the government's plans. 

The exchequer lamented that there is nothing it can do to further ease the burden for consumers, saying the impact of high fuel prices is a global phenomenon. 

With the removal of the subsidy plan and recently hiked taxes on petroleum products, Kenya will have the highest fuel prices in East Africa, pushing up further the cost of living. 

WATCH: The biggest news in African Business