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Blundering ministry on spot for illegally charging levy on diesel

By Macharia Kamau | October 1st 2021

For more than a year now, the government may have been charging the controversial petroleum development levy on diesel illegally, it has emerged. Diesel, the fuel used largely by transporters and manufacturers, was not included in the list of products whose petroleum development levy rate was increased last year.

A July 2020 legal notice by Petroleum Cabinet Secretary John Munyes increased the levy for different fuels, including super petrol, to Sh5.40, up from 40 cents a litre.

In the notice, the CS said the money collected through the levy would be used in the stabilisation of local pump prices to cushion Kenyans from sharp spikes.

The increase in the levy is one of the reasons for the recent record rise in fuel pump prices, with a litre of super petrol currently retailing at Sh134.72 in Nairobi, a six per cent increase from Sh127.14 per litre previously.

Diesel, on the other hand, is retailing at Sh115.6 a litre, up from Sh107.66, while kerosene, largely a poor man’s fuel for lighting and cooking, is going for Sh12.97 per litre, up from Sh110.82.

The omission of diesel in the Legal Notice 124 of 2020 means that the government has been taking Sh5.40 for every litre of diesel consumed in the country without the backing of the law.

And despite collecting in excess of Sh30 billion through the levy, the government has failed to draw from the kitty to stabilise fuel prices.

Details of the blunder by the Petroleum Ministry are captured in a report by National Assembly’s Committee on Delegated Legislation.

The committee was evaluating a new Petroleum Development Levy (Amendment) 0rder of 2021, which the ministry published in May this year in an attempt to correct last year’s mistake.

“The order seeks to amend the Petroleum Development Order, 2020, with the effect of inserting Automotive Gas Oil (AGO or diesel) to legally incorporate in it in the first schedule of the Petroleum Development Order of 2020,” said the committee.

“The justification was that the order was published and approved in 2020, and it was discovered later that AGO (diesel) had been erroneously omitted from the first schedule of the order.” The first schedule lists the different petroleum products and the development levy rates that consumers should pay.

The fuels that were affected by higher rates include super petrol, jet fuel, aviation spirit and diesel oil (different from conventional diesel).

The committee noted that the mistake by the ministry did not warrant the issuance of a different petroleum development levy order to amend the 2020 order.

Instead, the error could be corrected through a gazette notice. The report recommended the National Assembly to “annul in its entirety,” the petroleum development order of 2021 for contravening the Statutory Instruments Act.

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