The controversial hike in the Petroleum Development Levy has catapulted the little-known levy to being a major revenue earner for the government.
The Petroleum ministry increased the levy in July 2020 from 40 cents per litre of petrol and diesel to Sh5.40.
And over the financial year to June 2021, it raked in Sh26.1 billion, a huge jump compared to Sh1.98 billion it had collected the previous year.
The National Treasury, in the audited accounts for the Petroleum Development Levy Fund (Holding Account), noted that Sh25.2 billion were earnings from motorists who pay Sh5.40 every time they consume a litre of either petrol or diesel.
Another Sh874.68 million was an unspent balance for the financial year 2019/20 received from the State Departments of Petroleum and Energy.
“The huge increase in total receipts from the Kenya Revenue Authority (KRA) in the financial year 2020/21 of Sh25.2 billion against collections from KRA in the financial year 2019/20 of Sh1.98 billion is due to the increase in the rate of levy, which was increased from 40 cents (per litre) to Sh5.40 cents, an increase of Sh5,” said Treasury. KRA is the collection agency for the levy.
The hike in July 2020 was to the chagrin of consumers, who noted it would result in a high cost of living, with the increase in the cost of petroleum products affecting virtually every sector of the economy.
It is also among the many taxes on fuel that are partly to blame for the current high cost of fuel in the country.
Following the increase, Treasury expected to collect Sh23.57 billion through the levy over the year, but the collections have surpassed this target by six per cent to Sh25.2 billion.
“The approved estimates for the financial year 2020/21 was Sh23.57 billion against actual collections from KRA of Sh25.2 billion,” said Treasury in the report.
“This implies an over-collection of Sh1.63 billion, 106.5 per cent… the over-collection is due to increase in petrol sales volumes.”
When PDL was increased, the Petroleum ministry then noted that it would be used to cushion motorists whenever there was a spike in the retail cost of petroleum products.
But the Treasury report shows that most of the money was diverted to the State Department of Infrastructure.
Treasury disbursed Sh18.14 billion to infrastructural projects, while another Sh3.22 billion was transferred to the Petroleum ministry and Sh2.21 billion went to the Energy ministry.
This was a cause of concern last year when Parliament probed the high cost of fuel prices, with the National Assembly’s Committee on Finance and National Planning recommending that Treasury recover the money and return it to the PDL Fund.
“The disbursements to the State Department for Infrastructure and Ministry of Energy were misapplied since they were not in line with the intended purpose of the PDL Fund… the National Treasury did not provide a list of projects that were done under the Infrastructure Department and Energy ministry that was in support of the oil industry development,” said the committee in its report last October.
“The National Treasury upon adoption of this report starts the process of reverting the Sh18.1 billion that was misapplied back to the PDL Fund for the purposes of stabilisation of fuel prices,” added the committee.