Zero rating of cooking gas pays off with rise in uptake now at 33pc
Business
By
Patrick Alushula
| Dec 01, 2016
Consumption of Liquefied Petroleum Gas (LPG) has improved by 33 per cent to 144.6 metric tonnes following the removal of taxes.
According to the latest report by Petroleum Institute of East Africa (PIEA) for the nine months to September, LPG - popularly known as cooking gas - had the fastest growth among all other energy sources.
PIEA Chairman Powell Maimba attributed the rise to the abolishing of 16 per cent Value Added Tax (VAT) on the product as well as aggressive marketing by suppliers.
"The removal of taxes encouraged prices to go down, increasing the consumption of LPG. There has also been an increased effort in rounding up illegal refillers," Maimba told The Standard on phone.
He further noted with the significant drop in illegal players, the current data has incorporated only the legally registered players, therefore boosting accuracy.
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Uptake of the energy source has further been boosted by the order by the Energy Regulatory Commission (ERC) to registered LPG players to allow consumers to refill cylinders regardless of the company as long as they are registered.
The regulator has warned those in breach of the directive that they risk losing their licences.
"Today, if you have two different players who are registered by ERC and have valid licences, it is illegal for either of them to refuse to refill a cylinder from each other," said Mr Maimba.
In the July budget, National Treasury Cabinet Secretary Henry Rotich announced that the Government had removed taxes on LPG to encourage its consumption and discourage the use of kerosene.
Data from National Bureau of Statistics shows that unlike in September last year when a 13kg cylinder retailed at an average of Sh2, 387, the price has reduced significantly by 16.7 per cent to Sh1, 987.
The latest PIEA report shows consumption of kerosene has also gone up by 16 per cent to 414 .1 million litres. This is from 356.8 million litres consumed in a similar period last year.
Mr Maimba said the impact of introduction of Sh7.21 as tax on every litre of kerosene consumed was watered down by corresponding increase of Sh6 as tax on petrol and diesel.
"In terms of difference, there is not much that happened. People still find motivation to adulterate since the price differentials still exist," he said.
The Government had cited adulteration as part of the reason for introducing additional taxes on kerosene.
Going forward, oil marketers are now lobbying the government to extend zero rating of gas cylinders.
This, Mr Maimba believes, will bring down the prices further and boost uptake.
"There has to be a deliberate move to extend the gesture to encourage people to buy the equipment for utilisation of gas. Currently, the gas cylinder comes with import duty," he said.
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