Poor hit hard as Kerosene prices go up, again

Price of kerosene to go up following the upward revision of taxes

The price of kerosene will go up this morning following the upward revision of taxes charged on the petroleum product.

The Energy Regulatory Commission (ERC) increased the pump price of the product by Sh3.10 per litre yesterday, making it the second time this month that the regulator has pushed up the price of kerosene.

Mid-June, in its monthly price guide, the regulator increased prices by Sh5.88. Combined, the price change will mean an increase of Sh9 per litre of kerosene in just a month.

ERC said yesterday’s price hike was in line with the budget statement presented in Parliament by the National Treasury Cabinet Secretary Henry Rotich.

In the June 14 statement, Treasury sought to increase the excise duty levied on kerosene by Sh3.10 per litre in a move aimed at curbing fuel adulteration. This would mean that excise duty on kerosene would increase to Sh10.31 per litre, from the earlier Sh7.21.

After the revision, kerosene will now retail at Sh87.2 per litre in Nairobi from Sh84.1, which had been announced in the monthly price capping guide by ERC on June 14.

It will retail at Sh84.42 per litre in Mombasa where oil marketers incur little cost in moving the product to their outlets and at over Sh101 in far flung towns such as Mandera.

The increase will hurt low income households across the country who use kerosene for lighting and cooking.

ERC gives a price capping guide the 14th of every month, prescribing the maximum retail prices that oil marketers can charge for super petrol, diesel and kerosene.

"In the pump prices published on June 15, ERC did not factor the increase of Sh3.10 per litre in excise duty for kerosene as proposed under the Finance Bill 2018. The increased duty takes effect on July 1," said ERC in a statement announcing the new retail prices.

"As a result, the Commission has recalculated the maximum pump prices for kerosene that will be in force from July1 to July 14 taking into the additional excise duty… prices for super petrol and diesel which were released on June 14 remain unchanged."

At Sh87, the retail price of kerosene has more than doubled over a two year period, going up from Sh40 in February 2016.

The move might be effective in fighting adulteration as businesses carrying out the illegal activity might not have the incentive to push up volumes of diesel using kerosene with excise duty levied on both products being at the same level. It might however affect low income households that rely on kerosene for lighting and cooking.

The increase might also be the first of several price increases planned by the Government on kerosene, with the State considering further increases in taxes on kerosene to match those levied on diesel over the next one year.

At the end of the price review proposed by ERC, the cost of kerosene might go up by as much as Sh21, which might mean the product will retail at Sh105 per litre based on the current pricing of a litre of kerosene in Nairobi.

With yesterday adjustment on excise duty on kerosene, consumers will now pay a total of Sh8.51 per litre in taxes. This is in comparison to Sh29.65 per litre for diesel and Sh39.18 for petrol.

Kerosene is at the moment not subject to the Road Maintenance Levy, which stands at Sh18 per litre for diesel and petrol.

The low cost tax was meant to cushion poor households from high petroleum prices but has been abused by unscrupulous oil dealers that lace the other two products with kerosene to increase volumes of their products. The mixture usually has a harmful effect to engines and the environment.