MPs call for review of fuel price formula

A car fuel at Rubis Petrol Station along Gitanga road in Lavington, Nairobi [Boniface Okendo, Standard]

Lawmakers have ordered a review of the pricing formula to lower fuel prices.

In a report tabled in the House yesterday, the Finance and National Planning Committee directed the Petroleum ministry and the Energy and Petroleum Regulatory Authority (Epra) to ensure every parameter in the formula is accounted for.

The report, if adopted by the House, will see Value Added Tax (VAT) reduced from 8 per cent to 4 per cent as well as Petroleum Development Levy (PDL) cut by a half.

Also targeted for reduction is the VAT rate on Liquefied Petroleum Gas (LPG) from 16 per cent to 8 per cent as well as the gross margins of oil marketing companies by Sh3.

Upon adoption of the report, the National Treasury will be required to revert the Sh18.1 billion that was misapplied back to the Petroleum Development Levy Fund for stabilisation of fuel prices.

The report also seeks to have the Kenya Ports Authority fast-track the completion of the Kipevu Oil Terminal II in order to reduce demurrage costs.

The report further seeks to have the number of days that a ship can stay at the Kipevu Oil Terminal (KOT) be specified as is the case with Shimanzi Oil Terminal in order to reduce demurrage charges.

Document that was tabled before the committee had revealed that the taxpayer spent Sh1.3 billion in demurrage charges between January and August. The amount was paid to 60 vessels that docked at the Port of Mombasa.

Demurrage is the fee paid when a ship arrives at the terminal to discharge oil and has to wait beyond the stipulated time. It is charged on an hourly rate based on the agreed market price and it emerged yesterday that a vessel attracts Sh4.5 million per day it spends at the port.

“The fuel pricing formula be amended to make demurrage a standalone factor of calculation of the price of fuel as opposed to the current scenario where it is factored in the landing costs,” recommends the report.

The report was tabled on a day the committee fined Petroleum Cabinet Secretary John Munyes Sh500,000 for snubbing summons.

The National Assembly last week ordered the CS to appear before it without fail to explain high demurrage charges that is linked to the high cost of fuel.

But yesterday Munyes sent Epra Director General Daniel Kiptoo to represent him.

Kiptoo told the committee that Munyes was away in South Sudan on official duty.

The Standard
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