Outrage, anger and frustration in expensive but scarce fuel

A board showing fuel prices in Kisumu on September 02, 2018. Fuel prices that have gone up are likely to affect transport costs across the country. [Denish Ochieng/Standard]

The Parliamentary Budget Office (PBO), an economic advisory arm of the Legislature, convened yesterday to assess the full extent of the new taxes on household budgets.

The PBO will then provide an independent analysis for the National Assembly, which has already rejected the new taxation measures through amendments to the Finance Bill 2018.

Members of Parliament voted to suspend the taxation proposals by the National Treasury; the legislation is awaiting presidential assent to become law.

Phyllis Makau, the director in charge of PBO, said the meeting was convened following a public outcry over high taxes instigated by the International Monetary Fund.

“Our deliberations would be on assessing the effect that VAT would have on the broader cost of living and advise Parliament,” Ms Makau said.

Outcomes from the meeting will inform possible interventions by the legislators, including whether the taxes should be suspended or abolished altogether.

Increasing the cost of petroleum products cascades to every sector, but the extent varies depending on the proportion of the energy component in rendering the service.

Outrage that followed the imposition of 16 per cent in Value Added Tax on petroleum products was yesterday compounded by a declaration that fuel products were actually under-taxed.

An amendment to the pricing formula would inadvertently lead to another round of fuel price escalations, likely sending a litre of super petrol to over Sh130 in Nairobi.

The intention to review the formula, as proposed by the Ministry of Petroleum, was to protect the profit margins of oil marketing firms, but at the expense of consumers.

Marketers, who are already on a go-slow that has resulted in a biting fuel shortage, are demanding a review of the pricing formula that would shield their margins from taxes.

In the contested schedule, VAT is charged on the total of the landed cost, excise duty, distribution costs and marketers’ margins.

But Petroleum Principal Secretary Andrew Kamau said the marketers’ margins should be excluded from the vatable amount.

And the Energy Regulatory Commission yesterday issued a directive standing by the existing pricing, which points to a sustained stand-off whose result is widespread shortages and long queues at the pump.

Mr Kamau said oil marketers were loading petroleum products at the depots — both those privately-run as well as at the Kenya Pipeline Company.

The only problem, he said, were that trucks had blockaded the roads leading to the depots, paralysing collections.

Police later ordered the arrest of anyone blocking the entry points to the depots.