Hike in EPRA levy denies motorists a bigger drop in pump prices

A higher Energy and Petroleum Regulatory Authority (Epra) levy denied motorists a bigger drop in the cost of fuel last week after it was effected in the February-March pricing cycle.

Prices for super petrol, diesel and kerosene dropped by Sh1 per litre in the new prices announced on February 14 by Epra.

This, however, was after the regulator included the new levy of 75 cents per litre of petrol, up from 25 cents per litre.

Over the February-March cycle, super petrol will retail at Sh206.36 in Nairobi, diesel at Sh195.47 and kerosene at Sh193.23.

The Energy and Petroleum Ministry gazetted the new levy on February 14.

"These regulations may be cited as the Energy (Energy and Petroleum Regulatory Authority Petroleum Levy) Regulations, 2024 and shall come into operation on February 15, 2024," said Energy Cabinet Secretary Davis Chirchir in a Gazette notice.

According to the Energy Act, 2019, levying petroleum products and electricity are the key revenue sources for Epra to enable it to regulate the two industries.

The Act caps the levy at "one-half of a per cent on the sales of electricity and petroleum products."

The higher levy on petroleum products comes months after Epra's electricity levy was also increased to eight cents per kilowatt hour (token) of electricity that Kenyan households and businesses consumed in July last year from three cents per unit.

The levies, in addition to other revenue sources such as penalties and licence fees, earned Epra Sh1.55 billion in revenues in the year to June 2022.

The increase in petroleum levy is despite concerns in the past that taxes and levies on petroleum products are among the factors that have sustained the high cost of fuel in the country.

At the moment, taxes and levies stand at Sh78.76 per litre of super petrol, which translates into about 38 per cent of the pump price of Sh206.36.

The taxes have over the years been on a consistent increase and in the last year, other than the regulatory levy, the government in July 2023 also increased the value-added tax (VAT) on petroleum products from eight per cent to 16 per cent.

In 2020, there was a steep increase in the Petroleum Development Levy from 40 cents to Sh5.40 per litre.

The government has also proposed to increase the Road Maintenance Levy to Sh22 per litre of diesel and petrol from the current Sh18.

The levy, used in the repair and maintenance of roads, has doubled in the last decade from Sh9 per litre. It was initially adjusted in 2014 to Sh12 then to Sh18 in 2016.

Stakeholders have proposed the reduction of some of the taxes and levies, including halving some of them, to reduce fuel pump prices.

Sustained high prices have seen motorists and even industries reduce consumption of petroleum products, sparking fears that this could affect economic growth.