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Rising taxes, stifling policies heat up cooking gas market

FINANCIAL STANDARD
By Macharia Kamau | October 12th 2021

Global prices of gas have been going up owing to increased demand. [Christopher Kipsang, Standard]

The price of cooking gas has shot up after the government imposed a 16 per cent value-added tax (VAT) on the essential fuel.

Refilling a 13kg liquefied petroleum gas (LPG) cylinder now costs between Sh2,500 and Sh2,700.

Until recently, the uptake of LPG in the country had over the last decade been on the rise on account of a favourable policy environment, which enabled consumers to shift from kerosene and charcoal.

This included lower taxes compared to other fuels and an exchange pool that made it possible for consumers to refill their cylinders from any LPG retail point.

However, some of these gains have been rolled back following a policy shift in the sector, including the disbandment of the exchange pool and imposition of VAT on cooking gas.

Data by the Kenya National Bureau of Statistics (KNBS) shows that demand for LPG has more than tripled over the last 10 years to 326,200 tonnes in 2020 from 93,600 tonnes consumed in 2012.

“This development points to the possible substitution of kerosene for LPG,” KNBS said.

But government policy appears to have shifted, with the imposition of VAT on cooking gas in July.

Global prices of gas have been going up owing to increased demand.

Rubis Kenya Managing Director Jean-Christian Bergeron said the impact of higher taxes combined with the increase in global gas prices could be negating the progress that Kenya has made in LPG uptake.

“VAT on cooking gas came at a time when the international prices are on the rise, and this combination was bound to make it expensive. It has the potential to slow down the uptake of LPG in the country,” he said.

Mr Bergeron added that the industry still grapples with the challenge of illegal refiling, a major disincentive for players to invest in additional infrastructure, such as refilling plants and gas cylinders.

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