Ministry moves to rein in runaway fuel cost

A government plan to rein in the spiralling petroleum prices was met by wide approval on Tuesday.

The Ministry of Energy said it had drafted a legal notice that would control retail fuel prices.

The move comes in the wake of skyrocketing prices, which lead to an increase in the cost of transport and consumer goods. Many poor Kenyans also use kerosene for cooking and lighting.

In Nairobi, petrol prices have risen by as much as Sh7 a litre in the past month, reaching Sh105 in some stations. Motorists and commuters have been the most affected as public service operators raise fares.

On Tuesday, Permanent Secretary Patrick Nyoike said the Energy Regulatory Commission forwarded the Legal Notice to the Attorney General on Monday.

Once Attorney General Amos Wako gives his nod, Minister Kiraitu Murungi will be at liberty to publish it, thereby effecting it to tame the fuel price surge.

Representatives of the tourism and transport sectors welcomed the plan.

“The government should have controlled fuel prices long time ago... lowering the costs of fuel will boost domestic tourism,” said Mr Titus Kangangi, chairman of the Kenya Association of Hotelkeepers and Caterers (KAHC) Coast branch.

Kenya Transport Association chair Paul Maiyo said the move will bring down the cost of goods transport and of the products.

PS Nyoike said the Energy Act of 2006 gives the minister power to control retail prices of petroleum products.

“The rising fuel prices are unacceptable...They make life difficult for Kenyans and hurt the economy,” he said, adding, the planned legal notice would address the problem.

The workers union, Cotu, has threatened a general strike and mass protests if the price surge is not halted. Secretary general Francis Atwoli said on Monday that the union would meet next week to decide on the matter.

Mr Nyoike on Tuesday told Kenyans to be patient, saying, the issue was being addressed.

He warned that oil firms that ignore the legal notice risked penalties of up to Sh1 million.

A formula, he said, would be worked out by the government on how oil marketers will be operating just like it is done in South Africa and neighbouring Tanzania.

The PS was speaking on the sidelines of the inauguration of the 90MW Rabai Power in Kilifi County.

Reacting to the move by the government, players in the hotel industry lauded the action saying the fuel price rises were hurting the economy.

Mr Kangangi said majority of Kenyans cannot go on holiday because of high transport costs.

The Kenya Transport Association (KTA) said the move was “long overdue”.

“We are suffering due to escalating fuel prices which have continued to hurt our business yet we cannot increase transport charges because of stiff competition. Regulating fuel prices is definitely the way to go so that we are protected,” said chief executive Grace Maina.

She said the cost of fuel in transport business had over stretched their budget, since it was currently running to over 50 per cent compared to other costs.

According to transporters, the cost of transporting cargo from Mombasa to Kampala currently stands at $ 2,200 (Sh176,000) per trip, with a truck burning 1,200 litres of diesel at a cost of Sh95 per litre, which means nearly 60 per cent of the cost (Sh114,000) goes to fuel.

Mr Maiyo said the internationally recommended rate of fuel cost should be 26 percent of the revenue generated.

However, Mr Jaswinder Bedi, the chairman of the Kenya Association of Manufacturers, said that fuel price control is untenable.

Reported by Mathias Ringa, Justus Ondari, Gitonga Marete and Ashley Lime