City Hall, Roads and Transport ministries all eye motorists’ wallet

By Macharia Kamau

Everybody, it seems, is out to raid the motorists’ wallet by making moves that will keep fuel prices up even with the fundamentals that influence prices remain stable.

In just one week, two ministries have proposed increasing the road maintenance levy, while two weeks ago, the City Council of Nairobi slapped transporters of petroleum products with a Sh2,000 parking fee, which has direct implications on fuel costs.

The ministry of roads said it has proposed to the Ministry of Finance to increase the road maintenance levy by between Sh3 and Sh9. This meant that the levy that currently stands at Sh9 could double should Treasury take up the proposal seriously.

The Roads Ministry wants more money going to the Kenya Roads Board for maintenance of roads, with Minister Franklin Bett arguing that the money allocated to the board annually amounting to about Sh25 billion is not enough to run roads maintenance projects. The Roads Board requires a budget of about Sh40 billion for maintaining roads.

Railway venture

Not left out in the struggle to get a piece of motorists’ cash is the Ministry of Transport, which also wants the road maintenance levy revised upwards. This time not to repair or build more roads, but to raise funds to sustain and further develop rail infrastructure.

During the commissioning of the Syokimau Railway Station, Transport Minister Amos Kimunya and Kenya Railways Corporation Managing Director Nduva Muli, alluded to the possibility of going to Treasury with a proposal akin to what the Roads Ministry has.

They want Treasury to increase fuel levies and impose charges on heavy commercial trucks to sustain the aging rail system, besides developing new railway lines in the country. “It is seven years since the fuel levy charge was increased to Sh9 per litre of diesel and petrol. My office has forwarded to the Minster for Finance a request from KRB to increase the fuel levy by a minimum of Sh3 and preferably a maximum of Sh9 per litre of diesel and petrol,” explained Bett.

In the mix also, is the City Council of Nairobi that plans to introduce a Sh2,000 daily parking fee for trucks loading fuel at Kenya Petroleum Company’s Industrial Area depot.

Though this was shelved close to two weeks ago when the transporters went on a strike, the fee proposal is still on the table and the council is expected to engage stakeholders before formalising the new fee. It is, however, an attractive revenue stream that City Hall is unlikely to shelve.

The proposed rise in the price of fuel combined with future wholesale prices of crude oil pointing to another four per cent rise no doubt poses additional downside risks to an already difficult outlook for the consumer.

Consumer confidence

The proposed increase in fuel prices comes at a time when consumer confidence, modest improvement in the economy and easing inflation appear to have bolstered overall investor confidence.

That confidence is one reason for the upbeat forecast recently given by Finance Minister Njeru Githae that signs are good for Kenya to surpass its growth forecast.

But with key ministries eyeing fuel to meet their goals, this does not bode well for growth prospects.

Billow Kerrow, who runs independent oil marketing firm Trojan International notes that these are costs that are unlikely to be absorbed by any of the players along the value chain and would be passed on to consumers.

“All these levies are used in determining retail prices by the ERC... the Commission looks at costs that marketers incur in getting their products at the pump before fixing retail prices. The moment the levies go up, the increased cost will automatically be pushed to the consumers,” reckons Kerrow, who is also a former parliamentarian.

“The proposals defeat other measures put in place in an attempt by the Government to contain the high cost of doing business in the country.... it will also have an impact on the general economy.”

He said the different government bodies should be more creative in sourcing additional revenue, noting that business and individuals are already paying taxes that should be used in maintenance of roads and rail infrastructure, rather than stifling tax compliant businesses with additional taxes and levies.

“Every sector including the oil industry is paying taxes that should go to improving different infrastructure. Money to maintain roads should come from the taxes already paid up by Kenyans,” he said.

Kerrow reckons that tolling roads could be an alternative source and targets road users, but increasing the prices of petrol would hurt consumers who might not necessarily be a road user.

“Toll stations are there even in other markets and we had them sometime back but the challenge for Kenya is failure of accountability and the money ends up being misused.”

Though retail fuel prices eased slightly this month to Sh113.68 for a litre of super petrol in Nairobi, the prices, however, are still high.

Fuel prices have a big effect on the rate of inflation, which fell to 4.14 per cent in October, up from 5.32 per cent the previous month. Economists say high pump prices would in most instances result in rise in the cost of most basic commodities and services, given the dependence of fuel by the economy.

Players say that petroleum is among the heavily taxed industries.

Apart from the Road Maintenance Levy,  other charges include excise duty of Sh19 on a litre of petrol and Sh8 per litre of diesel, petroleum development levies, import duty and value added Tax  among other charges.