The government has been forced to backtrack on the proposal to increase the Road Maintenance Levy Fund (RMLF) on petrol and diesel by 39 per cent, following public outcry.
The Sh7 increase would have totaled Sh25 from the current Sh18. This would have addressed the funding shortfall of Sh157 billion since 2016.
The State says the annual maintenance rate ought to be set at Sh34 per litre. However, the government opted for a phased approach as the economy recovered from the effects of Covid.
Roads and Transport Cabinet Secretary Kipchumba Murkomen said that had the proposal sailed through, this would have seen the cost of petrol and diesel rise from the current Sh189.84 and Sh173.10 to Sh196.84 and Sh180.1 respectively.
Based on industry averages, truckers would have seen their vehicle operating costs increase by 0.6 per cent to 0.9 per cent per annum - fueling inflation. Similarly, this would have raised unexpected revenue of Sh115 billion for the government.
CS Murkomen who spoke during the conclusion of the exercise in Nairobi said the government will now seek alternative ways of maintaining and developing roads through RMLF. "We'll explore ways of increasing the levy without increasing the fuel prices even if it means waiting until petroleum prices come down," he noted.
He said the Sh25 per litre rate would still leave a deficit.
The fuel levy was last reviewed in 2016 when it was increased from Sh12 to Sh18 per litre. The State says collections have matured to Sh80 billion annually from the levy.
Due to inflation, however, the current annual RMLF collections are equivalent to Sh52 billion in 2016 prices. To maintain the real value of RMLF at 2016 prices, annual collections in FY 2023/24 ought to be at least Sh122 billion.
Murkomen said the rise in inflation has resulted in higher costs of construction and maintenance over the years to date since 2016.
Similarly, oil prices globally have significantly increased over time with the average free on board (FOB) price for crude oil imported into Kenya increasing from $44 (Sh5,632) per barrel in 2016 to $79.06 (Sh10,119) as of March 2024 - an 80 per cent increase, translating to a fuel pump increase of Sh28 and 67 per litre respectively.
This has resulted in the reduction of the Fuel Levy rate from 64 per cent to 16 per cent.
Additionally, Kenya’s road network has grown by 77,671 kilometres to 239,122 from 166,451, with the paved network requiring more funds for maintenance.
As of 2023, 69 per cent of the road network was in good condition requiring resources to preserve them with 30 per cent being deplorable requiring resources to maintain them.
CS Murkomen said backlog maintenance of Sh445 billion has grown to the current Sh727 billion over the years on the National Trunk Road network managed by the Kenya Rural Roads Authority (KeRRA).
Terming it as insufficient to maintain the paved road network, the 32 per cent Fuel Levy allocation to KeRRA is shared equally amongst 290 constituencies at Sh63 million each annually, leading to many poor roads.
The depreciation of the shilling against major world currencies from 2016 also hurt imports including fuel products.
Kenyans, however, turned up in large numbers during the public participation - expressing their disapproval of this move, stating that this would upsurge the already high cost of living.
