Kerosene users to pay more as agency fights fuel adulteration
Petroleum Principal Secretary Andrew Kamau. FILE PHOTO | NMG
What you need to know:
- A litre of paraffin to cost as much as that of diesel in proposals submitted to Parliament by the government.
- The plan to introduce an Sh18 per litre road maintenance levy on kerosene to discourage its use for adulteration has reached an advanced stage with possibilities of being incorporated into the 2018 Finance Bill.
- Add that to the 16 per cent Value Added Tax on all petroleum products set to kick in next week and paraffin may cost up to Sh120 per litre.
Poor households, which depend on kerosene for cooking and lighting will soon pay the same price for the fuel as an owner of a truck consuming diesel, if Parliament approves a government proposal.
The Sunday Nation has learnt that the move to introduce an Sh18 per litre road maintenance levy on kerosene to discourage its use for adulteration, has reached an advanced stage with possibilities of being incorporated into the 2018 Finance Bill.
Add that to the 16 per cent Value Added Tax on all petroleum products set to kick in next week and paraffin may cost up to Sh120 per litre. The move could slowly phase out the product from the market or at least minimise its use.
The Energy Regulatory Commission (ERC) has written to Parliament seeking the nod for the price rise, which is bound to elicit sharp reactions especially because kerosene is mainly used by households that cannot afford cooking gas or alternative power for lighting.
Petroleum Principal Secretary Andrew Kamau confirmed the plans to raise paraffin prices, blaming the Sh18 difference between it and diesel prices as the key motivation for crooks who mix kerosene and diesel to increase margins while endangering the lives of motorists.
“That is the only solution we have for now to tame adulteration. The common narrative that kerosene is used by poor households is such misinformation. This product is mostly being used for adulteration. We lose revenue, we endanger lives and still hurt our export market in the process just because kerosene is cheaper than diesel,” Mr Kamau said.
The PS told Sunday Nation that just like Tanzania matched the prices for the two commodities, Kenya will apply the same method to keep adulteration at bay and continue promoting the use of cleaner energy sources like Liquefied Petroleum Gas (LPG).
In Arusha for example, a litre of kerosene now costs Tsh130 higher than that of diesel as the country fights fuel adulteration, a move that is said to have seen importers in the region prefer fuel from Dar-es salaam to that from Mombasa.
The ministry was puzzled by the increasing demand for kerosene despite deepening power connection under the Last Mile Connectivity programme and increased uptake of LPG, prompting a market research last year that showed fewer people using kerosene for lighting and cooking in various households across the country.
Official data from the Kenya National Bureau of Statistics shows that demand for kerosene has been on the rise over the last five years despite the average price of LPG declining. The price of a 13kg cylinder dropped by 3.7 per cent from an annual average of Sh2,154.81 in 2016 to Sh2,075.29 in 2017.
The growing demand is believed to be driven by unscrupulous traders who mix kerosene with diesel and make high margins in an illicit trade that has threatened Kenya’s export market in the last five years.
Poor homes which buy kerosene in very small measurements are also said to be hard hit as the traders sell the commodity at close to Sh200 per litre since most buyers cannot afford to buy in litres.
In June, Treasury Cabinet Secretary Henry Rotich raised excise duty on kerosene from Sh7 per litre to Sh10 per litre to match that of diesel and petrol. The price has since shot from the Sh67 per litre average of 2017 to the Sh84.95 per litre announced in the August review.
Consumers Federation of Kenya Secretary-General Stephen Mutoro termed the increase in price punitive and called for alternative strategies to deal with adulteration as the government seeks other fuel sources for the rural poor instead of making kerosene expensive for them.
“There ought to have been need for a better strategy than taking the easy way to punish the poor. ERC has not properly diagnosed the cause of fuel adulteration and even those caught have always gone unpunished. It’s a wrong prescription for a bad diagnosis. We must first to ensure that those using kerosene have a proper transition to cooking gas and other sources of energy otherwise we may still end up damaging the same environment we are protecting,” Mr Mutoro said.
Kerosene users will now be pushed to pay for money used to maintain roads as much as stoves and lamps are not used on the road. They now join motorists who also pay for a railway development levy on diesel and petrol despite rail transport being a competitor in their business.
Also to feel the pinch are paint manufacturers who had begun enjoying relief following last year’s budget proposals that amended the Excise Duty Act to allow refund of excise duty paid on kerosene used in the manufacturing of paints and resin. This may however be passed down to consumers in more expensive paints.
Other taxes and levies on kerosene include a Sh0.40 per litre petroleum development levy, a Sh0.05 per litre petroleum regulatory levy as well as a Sh0.51 railway development levy.
