Fuel pump prices to go up as State lines up hike in road levy

An attendant fuels a car at a filling station on Nairobi's Koinange Street. [File, Standard]

The cost of transport is set to go up in the coming months as the Transport Ministry starts the process of hiking one of the fuel taxes, setting Kenyans up for more pain at the pump.

The Road Maintenance Levy, which is one of the highest levies that make up the pump price, is set to go up by Sh7 per litre of diesel and petrol to Sh25 from the current Sh18.

A Sh7 increase per litre could see petrol prices inch closer to Sh200 in Nairobi. 

The move will further see an increase in the cost of the two critical petroleum products, with a resultant increase in the cost of transportation, which could push up the cost of essential goods and services.

This could set the government on another collision course with Kenyans who have protested the high cost of living, which is the basis of the ongoing demonstrations against the Finance Bill, 2024. 

A higher Road Maintenance Levy was among the proposals by the National Assembly’s Committee on Finance and Planning, in a give and take as it dropped the motor vehicle tax that had been proposed in the Bill. 

“The Ministry of Roads and Transport proposes an amendment to the Road Maintenance Levy Fund Act, 1993 by increasing the Road Maintenance Levy by Sh7 from Sh18 to Sh25 per litre of petrol and diesel,” said the Ministry yesterday in a call to the public to give their views on the proposed amendment to the law. 

“The value of Kenya’s road network has been established as Sh3.99 trillion. This valuable asset requires investments to protect it from deterioration and loss of value. Based on the project RMLF (Roads Maintenance Levy Fund) collections, the financing gap for road maintenance over the next five years has been estimated at Sh315 billion,” said the ministry.

The levy has doubled over the last decade and a half from Sh9 per litre in 2009 to Sh12 in 2012 and Sh18 in 2016. 

Among the factors that the ministry cited for the proposals to hike the levy is a 50 per cent increase in cost of road maintenance since 2016, an expanded road network and a lack of funding for the maintenance of roads assigned to the Kenya Rural Roads Authority (Kerra). 

“In the last 10 years, the government, with the assistance of development partners has carried out significant development and rehabilitation of the road network in the country. The road network has, therefore, grown from 161,451 kilometres to 239,122 kilometres,” said the ministry.

“As a result of increased import costs, local fuel prices have doubled since 2016 to date, whereas the RMLF rate has remained constant. In comparison with fuel import prices, RMLF rate has effectively reduced from 64 per cent to 16 per cent.

“The 32 per cent RMLF allocated to Kerra is shared equally among the 290 constituencies for maintenance of constituency roads, leaving no funds to address the maintenance of paved Kerra roads.”

The move will see the share of taxes on the pump price go up, further giving credence to arguments of overtaxation.

At the moment, a litre of petrol attracts Sh76.20 in taxes or 40 per cent of the Sh189.84 retail price in Nairobi.  Total taxes and levies for diesel stand at Sh62.97 or 36 per cent of the retail price of Sh173.10  a litre. 

At Sh18, the levy is the highest tax on diesel with excise duty being the second highest at Sh11.37. If hiked to Sh25, it will be the highest tax on petrol, ahead of the excise duty that is currently charged at Sh21.95 per litre. 

The public participation forum on the planned hike will be held in eight 10 major towns and cities across the country and only for a day on Monday, July 8. 

Kenyans can also submit written memoranda to the Kenya Roads Board (KRB), which administers the levy, delivered by email or hand by July 5. 

The Committee on Finance and Planning had proposed an increase in levy as a trade-off for dropping the 2.5 per cent tax on motor vehicles that had been proposed in the Finance Bill 2024. 

In its analysis, the committee noted that collections from the Road Maintenance Levy, which attracted some Sh84 billion in the 2022-23 financial year, are not adequate to cover road maintenance costs. 

It noted due to this decline, the government is in dire need of funds to undertake repairs, particularly following the destruction following recent rains. 

“The fall in the collections under the road maintenance levy has continued to affect the repair and maintenance of highways, urban, and rural roads. Recent el nino-linked heavy rains and flooding has further worsened the extent of road destruction in the country,” said the committee in its report on the Finance Bill.