Road gets tougher for motorists as fuel levies mount

Kenyans are bearing the burden of levies and taxes loaded on three most consumed fuel products as the government plans to introduce more tolls on the roads.

Data on fuel consumption as well as taxes and levy rates on petrol, diesel and kerosene now show Sh66 billion was raised from the consumption of these three products in the first six months of 2016.

The figure could be more than double by the end of the year as more people buy cars and other machines that run on diesel or petrol. The heaviest financial load on consumers of diesel and petrol was excise duty where they contributed Sh24.4 billion in the same period as excise tax on kerosene only got re-introduced after the Budget reading.

Added to the five fuel levies and taxes, tolling on some of the major highways in the country will make transport and energy among the most taxed segments, adding to the cost of living.

The levies include road maintenance levy (Sh18 per litre on both diesel and petrol), petroleum development levy (Sh0.40 per litre on all the three), 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, according to industry data seen by Smart Company.

Transport is the third weightiest factor after food and housing, water and electricity in measuring inflation according to the Kenya National Bureau of Statistics that put September inflation at 6.34 per cent, a marginal rise from 6.26 per cent in August.

The scenario is set to get worse with the possibility of an increase in fuel prices after the Organisation of Petroleum Exporting Countries (Opec) last week agreed to modest oil output cuts in the first such deal since 2008.

In two weeks time, Nairobi will be hosting deep-pocketed investors set to play major role in roads to be constructed under the Build Operate and Transfer approach.

Transport and Infrastructure Cabinet Secretary James Macharia told Smart Company the government will sell the plan which will see the contractors recoup their investments through tolls. The meeting starts October 18.

Tolling idea

He said the government had identified some major roads to be done by the private sector through BOT, one of them being the 487km Mombasa –Nairobi highway that will be dualled, with some areas having six lanes.

Others include the Nairobi-Nakuru from Rironi — because World Bank will be doing the section to Rironi — and Thika Road.

“The idea is quite a viable one because if you say, for instance, the Nairobi-Mombasa highway is Sh200 billion, then we tell the investor this is the money you need to invest then they formulate how much it will take them to recover the money and then we look at it to determine whether it is a good deal,” Mr Macharia said in an interview.

“The critical element however is how long it will take to recover because that is what makes it attractive for the investors,” he said.
Kenya, which previously suspended the tolling idea due to lack of a tolling policy, has since made one, which was recently approved by the Cabinet cluster of seven ministries.

The toll charge will see motorists grapple with two different fees for maintenance of roads, including the road maintenance levy which yielded Sh35.7 billion in the first six months of 2016.

The government is, however, constructing more roads across the country. The plan to tarmac 10,000 kilometres of roads under the Low Volume Seal Roads Programme is under way with the first 2,000 kilometres already on and another 4,000km set for a launch in the next three months according to Mr Macharia.

A Sh327 billion railway project which cost consumers of petrol, diesel and kerosene some Sh1.15 billion in the first six months of 2016 is also set for opening in June 2017.

Consumer Federation of Kenya (Cofek) secretary general Stephen Mutoro has accused the government which prides in having reduced the fuel cost charge in electricity bills from Sh7.22kWh in July 2014 to the current Sh2.31kWh.

The Cofek chief claims the government is giving with one hand and taking with another.

“If you look at the growing burden of taxation on areas that are sensitive like fuel then you will notice that it is a case of giving a little with the left hand and snatching a lot from the left one. There are so many agencies with the power to levy taxes and fees. Fuels touch every aspect of us and when it is taxed like this then I find it not sensitive to the poor at all,” Mr Mutoro told Smart Company.