ERC slaps consumers with Sh7.2 increase on Kerosene

Kerosene consumers were over the weekend hit by a Sh7.2 increase in price after the energy sector regulator made a sharp turn from an earlier position on treating the excise tax increase.

In a statement, the Energy Regulatory Commission (ERC) said that it had not factored in the increase of Sh7.205 per litre in excise duty in its prices released on June 14.

It is not clear why the regulator made a U-turn and recalculated the pump prices but Treasury has been under pressure to collect taxes to fund the ballooning budget.

"The increased duty took effect from 10th June 2016, a period which fell outside the period considered by the commission in the determination of petroleum prices as per the provisions of the energy regulations (petroleum pricing) 2010 (the pricing regulations).

Poor households will suffer the most given that they use Kerosene for cooking and lighting.

In its monthly fuel review, the energy sector regulator increased the prices of super petrol by Sh 1.92 per litre, Diesel by 3.34 per litre while Kerosene prices went up Sh3.82 per litre.

But with the new excise duty imposed, it means that Kerosene prices has cumulatively gone up by Sh10 a litre from the previous month.

Kerosene is now retailing at a maximum of Sh55.2 in Mombasa, Sh58.04 in Nairobi, Sh58.93 in Nakuru and Sh60 in Eldoret and Kisumu.

ERC Director General Joseph Ng'ang;a said that the pricing regulations stipulate that in determining the maximum retail pump prices, the commission shall use costs and volumes of cargos arriving in the country between the 10th of the previous month and the 9th of the pricing month.

"However, with the Finance Bill 2016 coming into effect and the subsequent Gazettement of the increase in excise duty outside the pricing cycle period, the excise duty so imposed us a pass through cost which should be applied without regard to the pricing period," Mr Ng'ang'a says in a statement released Friday.

As a result, ERC said it has recalculated the maximum pump prices for Kerosene that will be in effect from 18th June to 14th July 2016. The prices of super petrol and diesel remain unchanged, and will remain as reviewed last week.

Diesel is retailing at Sh73.71in Nairobi and petrol is selling for Sh86.17 a litre.

ERC said it was in consultation with the Kenya Revenue Authority and the Kenya Roads Board to establish the implementation date for the increase in road maintenance levy.

Motorists in Mombasa will continue buying diesel at Sh70.36, petrol at Sh82.78. In Kisumu, a litre of diesel costs Sh75.94 while petrol will cost Sh88.21a litre.
The difference in prices is created by transport costs from Mombasa. This makes consumers further away from the port to buy fuel at the most expensive rates.

These figures are set to increase by at least Sh6 per liter for consumers of diesel and petrol when ERC makes adjustments for the increase in road maintenance levy.

In his budget, Treasury secretary Henry Rotich proposed to increase the Road Maintenance Levy from Sh12 per litre to Sh18 per litre.

Government scrapped Excise duty on kerosene was in 2011 in a bid to cushion low income earners against high prices for the same, thus improving their standards of living.

But Rotich reversed this decision last week on grounds that it had been abused by unscrupulous traders who mix kerosene with other fuels especially diesel and then sell the same as pure diesel at the market prices realizing higher margins.

An increase in fuel prices is set to reverse the gains made in containing inflation since fuel is one of the biggest determinants of the prices of goods and services.

Kenya's May inflation hit a 35 month low of five per cent according to data from Kenya National Bureau of Statistics (KNBS).