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Motorists lose in fuel price hike as retailers gain

BUSINESS
By Macharia Kamau | May 15th 2021

Motorists using super petrol will have to dig deeper into their pockets after the government increased the price of the fuel by Sh3.56 per litre, pushing the cost to Sh126.37 in Nairobi.

Users of diesel and kerosene were, however, spared the hike with the cost of the two products remaining unchanged for the third consecutive month.

In its latest price guideline released yesterday, the Energy and Petroleum Regulatory Authority (Epra) also restored the margins for oil marketing companies, which had been slashed last month in a move to cushion Kenyans from a price increase.

“In the period under review, the price for super petrol increases by Sh3.56 per litre while that of diesel and kerosene remains unchanged,” said Epra in a statement signed by acting director-general Daniel Kiptoo.

Diesel, heavily used by transporters and manufacturers, will sell at Sh107.66 in Nairobi while kerosene, a lighting and cooking fuel largely for the poor, will retail at Sh97.85 in the capital.

The hike in the price of petrol came despite a drop in the cost of crude oil in April, when the products that will be consumed in the country over the May-June pricing cycle were procured.

Epra may, however, have factored in the costs associated with the price stabilisation in April and that spared consumers higher prices.

At Sh126.37 per litre, petrol will be retailing at its highest since September 2018 when it reached Sh127.8 per litre after the government introduced 16 per cent value-added tax (VAT) on fuel.

The high prices were short-lived, though, as the government reduced the VAT rate to eight per cent after yielding to public outcry.

When it retained April-May prices at the same level as March, Epra and the Petroleum ministry had brokered a deal with the oil marketing companies to slash their margins, but later be compensated by the National Treasury.

The companies took a Sh4.44 cut per litre of petrol. The cut was less on kerosene at Sh3.47 and diesel at Sh2.28 per litre.

In all, it is estimated that the total amount taken from the marketers last month was Sh1.34 billion.

While Treasury refunded the oil marketers the Sh1.34 billion, there was an extra cost of Sh0.50 per litre of fuel, said to be the administrative cost of processing and disbursing the compensation to the oil firms.

The amount was to be passed to the consumer and recovered over the May-June pricing cycle.

The fee was due to four companies that imported fuel under the Open Tender System (OTS), who were charged with disbursing the refunds from Treasury.

The marketers and the Petroleum ministry officials had at an April 15 meeting agreed that the Sh0.50 per litre was a prudent cost incurred in the delivery of petroleum products to Kenyans.

OTS is a Petroleum Ministry supervised system that pools the fuel needs of the oil firms and the marketers that bid to import at low prices get the job.

A total of 433 million litres of petrol were imported through OTS for the April-May cycle.

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