Why you could pay more for transport

NAIROBI, KENYA: Kenyans could find themselves paying more on transport before end of the year in new levy proposal on fuel products.

Energy Regulatory Commission is waiting for a nod from the Treasury to factor in the 16 per cent VAT which would increase the price of Diesel, Super Petrol and Kerosene. Treasury is expected to authorise the levy by September 1.

“We are only waiting for guidance from the government to factor in the new levy in prices of various petroleum products, the cost of living will obviously go up following the move because many Kenyans depend on transport in conducting their day to day work,” said Pavel Oimeke, Director General, Energy Regulatory Commission (ERC).

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If successfully introduced and current market conditions persist or worsen, including the projected rise in cost of crude oil, the VAT will push the cost of a litre of super petrol to over Sh120 in Nairobi and well over Sh130 in far-flung towns such as Wajir, where a litre of fuel currently sells at Sh120.46.

In an interview with the media, Matatu Owners Association said their members will pass new charges to commuters leading to an increase in fare prices across the country.

The Matatu Owners Association (MOA) Chairman Simon Kimutai said that in Nairobi for instance, the fare prices will go up by between Sh10 to Sh30 depending on the distance.

“The addition in fares will of course be painful to commuters but the increase has to take effect because taxation of fuel translates to an added cost to public service vehicles operators,” he said.

In an interview with the Standard Digital, ERC Director General Oimeke also warned households to step up preparations for higher Kerosene prices as government intensifies war on fuel adulteration.

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Currently Kerosene costs Sh85.73 per litre in Nairobi and Sh 99.54 per litre in Mandera while in Mombasa it retails at Sh82.94 per litre compared to Sh87.61 per litre in Kisumu.

“We are determined to end the issue of fuel adulteration currently denying the government Sh10 billion every year, this can only be tamed through hiking prices of kerosene to deter conmen from using it to contaminate the other petroleum products,” he said.

Business leaders including the Chief Executive Officers in the private sector have expressed fear that the cost of living may go up if the government implements the new taxes.

A survey by Central Bank of Kenya’s Monetary Policy Committee (MPC) released early July showed that while CEOs were generally optimistic about the economy, they thought the 16 per cent value added tax (VAT) on petrol might increase inflation.  

The new taxes on petrol fuels are expected to start in September. The new measure is part of fiscal consolidation backed by the International Monetary Fund, in which the Government seeks to reduce debt uptake and increase its tax revenues.

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Energy Regulatory CommissionMatatu Owners AssociationFuelVAT