President Uhuru Kenyatta has asked MPs to approve a cut on fuel VAT from 16 to eight per cent as he explained his rejection of the Finance Bill, 2018.
"Should parliament accept this proposal, petrol price will drop from Sh127 to Sh118 while diesel will drop from Sh115 to Sh107," he said.
MPs will now have to raise a two-thirds majority if they are to overturn Uhuru's proposal which waters down their proposal to shelve the VAT until 2020.
Addressing the nation on Friday, Uhuru said business owners should also reduce the cost of goods.
"I expect them not to take advantage of Kenyans and to lower their prices without any delays," he said.
Uhuru said Kenya still faces funding gaps adding that this measure will not balance Kenya's budget as required.
"I have proposed cuts in spending across arms of government on hospitality, foreign travels, seminars and other similar categories," he said.
"This cut will ensure that the sacrifices made by Kenyans are marched our discipline."
The president further noted that taxes raised by Kenyans have been used for an aggressive and successful development agenda.
He cited the enjoyment of new rights that came with the new Constitution in 2010 saying the same has been expensive.
"Your taxes are paying for clear tangible progress," he said.
Uhuru said the government has been able to build roads, connect homes to the electricity grid, and has improved health care.
"I have spent the last few days listening to a wide section of views and it is clear that you are all troubled by the effect of rise of petrol and its impact. I have heard and understand your concerns," he said.
"Your taxes will be used well. I have also proposed to increase resources available to fight corruption. Funding to the judiciary to speed up corruption cases ."
Uhuru spoke on the matter for the first time since his return from China.
On Thursday, he was tight-lipped on the contentious fuel tax during his first public appearance.
This comes even as Kenyans speculate that the cost of fuel may go up again during the monthly review on Friday due to rising global crude oil prices.
The president rejected the Finance Bill, 2018 which would have cushioned Kenyans from the tax for the next two years.
MPs have been recalled for a special sitting on Tuesday to deal with the tax issue.