Kenya: Another Fuel Price Rise Looms

By Edwin Okoth

The Energy Regulatory Commission is staring at a deep dilemma Friday as it readies to announce new pump prices amid the controversy over the 16 per cent value added tax on petroleum products.

With the rise in international crude prices last month and the VAT still in limbo but in force, the regulator may not have good news for Kenyans.

ERC’s pricing Friday is clouded in uncertainty with a contempt proceeding on its doorstep for failing to respect a Bungoma High Court order by Justice Stephen Riech quashing the implementation of the 16 per cent levy on petroleum products to enable the President to either assent to or reject the amended Finance Bill passed by the National Assembly.

The dilemma is heightened by the silence from State House with the long wait for President Uhuru Kenyatta who had been out of the country when the VAT kicked in and whose signature the court battle is pegged on.

SIGN INTO LAW

ODM leader Raila Odinga had even assured the public on September 3 that the president would sign into law the amendments to the 16 per cent VAT on petroleum products passed by Parliament.

Wednesday, government spokesperson Erick Kiraithe’s newspaper commentary that the president is yet to receive the bill pushing the tax by two years paints an even grimmer picture over the fuel tax stalemate.

In Kisumu, ERC sent lawyers in court in a bid to push for the setting aside of the court order, an odd scenario since the regulator has always insisted on not having been served by the same orders they are seeking to squash.

“The matter is coming up for further directions on Monday but for us, we are puzzled by how a government agency can disobey a court order and then come before the court to try and set it aside. They ought to have complied first, that is the law,” Lawyer Ken Ken Amondi, of Amondi and Company Advocates who represented the Sumawe Youth Group in the case told Nation.

INCREASING COSTS

Another oddity facing Friday’s price revisions is the increasing costs for crude oil through the month of August which will be key in determining the pump prices since landed cost is a key component of the monthly price revisions.

The crude oil prices have been on the rise from a low of $75 per barrel at the beginning of the month to yesterday’s high of $79.4 per barrel (according to Brett crude data), meaning ERC may be forced to raise the prices amid foul public mood over the VAT.

ERC uses the Platts data on the price of Brett crude as the benchmark for international oil prices.

Before the VAT was loaded on September 1, ERC had announced a Sh1.53 rise on the price of super petrol which was retailing at Sh113.73 before the VAT later pushed it to Sh128.8 two weeks ago. The price of diesel which had fallen slightly to Sh102.74 per litre in Nairobi now retails at Sh115.08 in Nairobi.

PUBLIC OUTCRY

Should ERC announce a higher revision of the petroleum product prices Friday, the uproar is bound to be worse since the public outcry took temporary relief thanks to the ongoing court battle and the hope of the president signing the Bill passed by parliament late last month to push the tax two years ahead.

Consumers Federation of Kenya secretary-general Stephen Mutoro said the move to delay presenting the Bill to the president is among the ploys being made to buy time.

“There is obviously no political goodwill to relieve consumers from this burden and for ERC to pretend to be implementing a tax law while ignoring a court order is simply a double standard. You will still see a rise in pump prices tomorrow based on these dodgy moves they have made since last week when we all know these products are already overtaxed. The president must make a move, it’s an unprecedented silence from him on this one,” Mr Mutoro said.

ROAD MAINTENANCE

Petrol, diesel and kerosene carry a heavy load of levies and taxes raising hundreds of billions for the government in revenues. Over Sh60 billion was raised from the consumption of these three products in the first six months of 2016 alone, according to the official data.

The levies include road maintenance (Sh18 per litre on both diesel and petrol), petroleum development levy (Sh0.40 per litre on all the three fuels), petroleum regulatory levy (Sh0.05 per litre on kerosene and Sh0.12 per litre on petrol and diesel) as well as railway development levy Sh0.50, Sh0.52 and Sh0.51 on every litre of petrol, diesel and Kerosene respectively. With another 16 per cent VAT added on a litre of all the products, the burden is heavier.

High fuel costs affect transport which is the third weightiest factor after food and housing, water and electricity in measuring inflation.

The Kootneeti Africa Monitor