State aims to tap low oil prices for funds to construct more roads

Transport and Infrastructure Principal Secretary John Mosonik (centre) during a press conference after inspecting the Kenya Ferry Services facilities in Mombasa on October 28, 2015. Mr Mosonik said the government was in need of other funding schemes to augment the exchequer and the current fuel levy if any meaningful infrastructural development was to be met. PHOTO | KEVIN ODIT | NATION MEDIA GROUP

What you need to know:

  • The new proposal by the State Department for Infrastructure proposes to set a price floor for petrol and diesel prices at Sh90 and Sh85 per litre respectively.
  • The plan, if implemented is estimated to have a potential to raise over Sh15 billion annually at the current ERC recommended prices.
  • Kenya Roads Board General Manager Rashid Mohamed said the plan is a golden opportunity for the government to bridge the widening road maintenance gap.

The government is seeking to take advantage of the falling oil prices to raise funds to fast-track road construction.

The new proposal by the State Department for Infrastructure proposes to set a price floor for petrol and diesel prices at Sh90 and Sh85 per litre respectively.

Where Energy Regulatory Commission (ERC) set price is lower than the two prices, the difference is then collected and remitted to government as road levy.

“Currently, the benefit of falling world prices are being enjoyed entirely by taxpayers, whereas the government is faced with growing infrastructure development needs,” said a proposal addressed to National Treasury Principal Secretary Kamau Thugge and copied to Kenya Roads Board Executive Director Jacob Ruwa.

The plan, if implemented is estimated to have a potential to raise over Sh15 billion annually at the current ERC recommended prices.

The amount is over and above the Sh12 per litre already being levied.

On Thursday, ERC released this month’s recommended prices with Super petrol retailing at Sh88.64 per litre in Nairobi, while diesel is to retail at Sh76.70. Mombasa retains the cheapest prices at Sh85.34 per litre of super petrol and Sh73.43 of diesel.

BOUNTIFUL OPPORTUNITY
Speaking to Saturday Nation, Infrastructure Cabinet Secretary John Mosonik said the government was in need of other funding schemes to augment the exchequer and the current fuel levy if any meaningful infrastructural development was to be met.

“If you look at how other countries fund infrastructural projects, it is no longer tenable to rely on government funding alone. The road maintenance levy is equally insufficient and we seriously need devise reliable funding formulas,” Mr Mosonik said without referring to the proposal at hand.

India is among the countries that have successfully implemented the floating levy rule.

Kenya Roads Board General Manager Rashid Mohamed said the plan is a golden opportunity for the government to bridge the widening road maintenance gap.

“We have a back log of close to Sh400 billion to maintain the current roads and we are still in the process of constructing others. This is the only chance to raise the funds and we ought to have started in July 2014. The common man have not had the trickle down effects of these declining fuel prices since the fall began with manufacturers and the public transport still using the same rates. It is a normal international best practice to share the spoils of fuel pricing and grow this economy,” Mr Mohamed said.

The proposal is however likely to raise eyebrows from consumers who had hoped for a further fall in pump prices as the international crude oil prices hit below $30 per barrel.

Consumer Federation of Kenya Secretary General termed the proposal as "impractical and dangerous for the market."