Home Business Regulator restores subsidy to keep petrol prices unchanged

Regulator restores subsidy to keep petrol prices unchanged


Economy

Regulator restores subsidy to keep petrol prices unchanged


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An attendant at a Total Petrol Station in Nairobi. FILE PHOTO | NMG

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Summary

  • The Energy and Petroleum Regulatory Authority (Epra) said petrol, diesel and kerosene prices would remain unchanged over the next month despite a rise in crude oil and cost of importing refined products.
  • A decision was made to keep the prices unchanged and cut the oil marketers’ margin, which has been regulated by the State since 2010, in a move that will see the State compensate the dealers an estimated Sh2.8 billion at taxpayers’ expense.

The energy regulator Wednesday opted to cut suppliers’ sales margin by up to Sh7.31 a litre to keep petrol and diesel prices unchanged and defuse public outrage over a monthly review that would have pushed fuel costs to a historic high.

The Energy and Petroleum Regulatory Authority (Epra) said petrol, diesel and kerosene prices would remain unchanged over the next month despite a rise in crude oil and cost of importing refined products.

A decision was made to keep the prices unchanged and cut the oil marketers’ margin, which has been regulated by the State since 2010, in a move that will see the State compensate the dealers an estimated Sh2.8 billion at taxpayers’ expense.

The marketers’ margin for super petrol has been reduced for the second time in four months from Sh12.39 a litre to Sh8.82 over the month to August 14, representing a cut of Sh3.57.

This kept the cost of a litre of petrol at Sh127.14 in Nairobi and would have increased to Sh130.71 without the subsidy—a high in Kenya’s history.

Suppliers’ margin on diesel was cut by Sh7.31 to Sh5.05 a litre, keeping the commodity at Sh107.66 instead of Sh114.97 in the absence of the price relief.

Recent price increases sparked anger among Kenyans, with the costly fuel unleashing pricing pressure across the economy and having ramifications on the cost of living measure.

The subsidy has been supported by billions of shillings that has been raised from fuel consumers through the Petroleum Development Levy, which was increased to Sh5.40 a litre in July last year from Sh0.40, representing a 1,250 percent rise.

The fund is meant to cushion consumers from volatility in fuel prices but it will also see motorists lose out when paying the Sh5.40 for a litre at the pump.

The State is tapping into the fund despite the absence of regulations to manage the subsidy scheme, having collected about Sh15 billion from motorists since July last year.

Kenyans on social media have recently raised concerns over reduced cash flow, fewer employment opportunities and mounting public debt, which triggered a petition to the International Monetary Fund (IMF) to stop giving the country more loans.

The cost of importing a litre of diesel rose to Sh53.96 in June from Sh50.64 in May while petrol increased Sh3.57 to Sh57.16—underlining the impact of taxes and levies on Kenya’s pump prices.

This has shifted the spotlight to taxation of petroleum products. There are seven levies and two taxes that Epra takes into account when setting fuel prices, which have been blamed for the high cost of petroleum products.

The levies account for nearly half of current petrol costs.

The costs of energy and transport have a significant weighting in the basket of goods and services that is used to measure inflation in the country.

Producers of services such as electricity and manufactured goods are also expected to factor in the higher cost of petroleum products.

The energy regulator raised foreign exchange and fuel adjustment surcharges it levies in March electricity bills, hitting household budgets.



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