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Pain at pump: How MPs plan to reduce fuel prices

House seeks to reduce VAT charged on petroleum products from 8 per cent to 4 per cent.

In Summary

• Taxman set to forgo nearly Sh27 billion in revenue should MPs settle on the proposals.

• Lawmakers further want VAT on cooking gas reduced from 16 per cent to 8 per cent, anticipating a reduction of Sh4.7 billion revenue collected from the tax head.

EPRA director general Daniel Kiptoo and Finance committee chairperson Gladys Wanga during the public hearing on fuel prices, Parliament Buildings, September 28.
DELAYED RELIEFS: EPRA director general Daniel Kiptoo and Finance committee chairperson Gladys Wanga during the public hearing on fuel prices, Parliament Buildings, September 28.
Image: EZEKIEL AMING'A

Lawmakers are considering tax cuts to ease fuel prices which are unlikely to come down soon after hitting a high of Sh134 for a litre.

The Finance committee chaired by Homa Bay Woman Representative Gladys Wanga seeks to reduce the petroleum levy charged on super diesel and petrol from Sh5.40 to 40 cents.

The levy would be charged on petrol, diesel and kerosene should MPs approve the proposal to revoke the Petroleum Development Levy Order, 2020 which increased the same by Sh5.

The committee further seeks to reduce the Value Added Tax (VAT) charged on petroleum products from 8 per cent to 4 per cent.

MPs want the National Treasury to prepare supplementary estimates to adjust the Sh22.6 billion revenue loss following the tax law change.

Lawmakers further want VAT on cooking gas reduced from 16 per cent to 8 per cent, anticipating a reduction of Sh4.7 billion revenue collected from the tax head.

The committee also seeks to reduce the gross margins for oil marketing companies to Sh3 from the current Sh12.

MPs at the same time want inflation adjustment on fuel for the year waived and the same be done biennially through the Finance Bill.

However, Kenyans may have to wait longer for the reliefs as the Wanga-led team is yet to issue a formal report to the August House recommending the adjustments.

The Homa Bay Woman Representative told a plenary sitting on Tuesday that the committee needs to probe new details on demurrage costs.

Demurrage is the charge that is based on the time a ship takes to offload fuel at the Mombasa Port terminal for storage by Kenya Pipeline Company.

The committee was to conclude the review of the factors staging the high fuel prices by Wednesday.

This would mean that taxpayers may have another month - or longer, to wait for the prices to come down.

The Energy and Petroleum Regulatory Authority will publish October - November prices a day after the scheduled release of the MPs' report.

EPRA director general Daniel Kiptoo last Tuesday warned that the prices may increase further considering the global price of crude oil.

Prices as of Wednesday settled at above USD 81 (Sh8,959).

There is word that the August House may reduce the timelines for considering the bill, or else the earliest Kenyans may get relief would be in the review on November 14.

Wanga said her team has, however, made significant progress having met 10 stakeholders in the fuel sector.

“The committee has received new information on demurrage charges which has a bearing on fuel prices. We want to inquire further on the charges which arise from delayed clearance of imported fuel,” Wanga said.

“We assure the House the committee is committed to its mandate and would hasten the process,” the lawmaker said.

Amendments to the Petroleum Development Act, 1991, would provide that the fuel levy be managed by a board similar to the one that mans the roads maintenance levy.

MPs also want the law changed to specifically provide that the levy be spent on stabilization of fuel prices and for the development of common facilities used to move oil products.

The committee has also reportedly sought a review of the formula used in the distribution of money from the fuel levy to oil marketing companies.

The Star has further established that MPs want National Treasury to immediately revert the Sh18.1 billion that was diverted from the Petroleum Development Levy Fund.

MPs further want regulations affecting taxes, levies, and fees to be decided upon in the plenary - by the whole House, and not the committees that ratify statutory instruments.

Sources further indicated that there would be a call for the Petroleum Ministry and EPRA to review the current pricing formula.

MPs during the public participation sought that KPA fast-tracks the completion of the Kipevu Oil Terminal II to eliminate the demurrage costs.

Edited by D Tarus