Low income households hit hard as State removes subsidies on kerosene

Poor households have been hit hard as the price of kerosene increased by Sh15 a litre following the government's withdrawal of subsidy on all petroleum products, pushing pump prices to record highs.

This is even as the country awaits the outcome of the debate on the Finance Bill 2023, which has proposed a further increase in the cost of fuel through higher value added tax.

Kerosene, used by many low income earners for lighting and cooking, will now retail at Sh161.13 per litre in Nairobi over the pricing cycle to June 14, up from Sh145.94.

The prices for super petrol and diesel have also gone up, with diesel that has previously been cross-subsidised by super petrol going up by a bigger margin of Sh6.40 per litre, according to the new prices published by the Energy and Petroleum Regulatory Authority (Epra) on Sunday.

Diesel will now retail at Sh168.40 per litre in Nairobi, up from Sh162 in the pricing cycle that ended May 14.

Petrol will retail at Sh182.70 per litre from Sh179.3.

"Super petrol, diesel and kerosene increase by Sh3.40 per litre, Sh6.40 per litre and Sh15.19 per litre respectively. The subsidy on diesel and kerosene has been removed," said Epra.

The higher prices will affect not just cost of transport but other products and services and will cause further strain on Kenyans who are already stretched by the high cost of living.

The government withdrew subsidy on petrol last year September, noting that it was short of funds to continue with the fuel stabilisation programme that was started by the previous administration in April 2021.

Despite the withdraw of the subsidy on petrol, the fuel tended to be cheaper than diesel and kerosene due to higher demand for heating (diesel) and other industries such as aviation (kerosene).

The government, instead of lowering the cost of petrol, would use the savings that would have accrued and cross-subsidise diesel while it continued to subsidise kerosene.

The International Monetary Fund has in the past voiced its concerns about the subsidy programme that it said was causing a strain on the exchequer.

Fuel prices could increase in the coming weeks if the proposals in the Finance Bill 2023 sail through in their current state.

The bill has proposed scrapping the clause in the VAT Act (2013) that put the VAT rate on fuel at eight per cent. This would see VAT on fuel go up to the standard of 16 per cent.

A segment of the local oil industry last week warned that this could see the price of super petrol increase to Sh200 per litre on July 1 should the 16 per cent VAT get the backing of MPs.