Fuel price relief for motorists as tax pain awaits in Finance Bill

The government has reduced the cost of fuel for the seventh straight month, giving Kenyans a breather and expectations that the cost of living will reduce further.

The pump price for super petrol will starting this morning go down  by Sh3 to Sh189.84 in Nairobi. It is the seventh consecutive month that retail petrol price has reduced, coming down from a record high of Sh217.36 a litre in November last year. 

The cost of diesel will reduce by Sh6.08 per litre and retail at Sh173.10 a litre in the capital. The cost of diesel has been reducing for the last eight months from a high of Sh205.47 in October last year.

Kerosene will also come down by Sh5.71 a litre and retail at Sh163.05 in Nairobi. 

The prices will be in place for the next one month.

“In the period under review, the maximum allowed petroleum pump price for super petrol, diesel and kerosene decreased by Sh3 per litre, Sh6.08 per litre and Sh5.71 per litre respectively,” said the Energy and Petroleum Regulatory Authority (Epra) in its monthly price guide. 

The lower prices were on account of a reduction in the landed cost, which is the cost of fuel products when they get to Mombasa before taxes and margins for oil marketing companies are loaded to the prices. 

“The average landed cost of imported super petrol decreased by 1.95 per cent… diesel decreased by 3.92 per cent… while kerosene decreased by 6.84 per cent,” said Epra. 

The price cuts are also due to recent strengthening of the shilling against the US dollar.

The local currency, according to Epra, traded at at average of Sh132.72 to the dollar in May, from Sh134.63 in April. The shilling has strengthened from a low of Sh164.42 in January this year.

Lowering fuel prices could calm Kenyans who have been agitating against some of the proposals in the Finance Bill, 2024 that if implemented are expected to increase the cost of transport in the country. 

Among the new tax measures that the National Treasury has proposed in the Bill include an annual motor vehicle circulation tax at a rate of 2.5 per cent of the value of the vehicle but at a minimum of Sh5,000.

The tax will be collected by insurance companies when motorists renew their annual motor vehicle insurance.

Different industry players have noted that aside from the impact that this would have on the insurance sector, it could also see a spike in the cost of transporting goods as transporters pass the impact of the new tax to consumers.

Other shocks that could on the way for the transport sector include the proposed hike in the Road Maintenance Levy.

The Transport ministry has recently announced plans to increase the levy by Sh7 per litre of petrol and diesel, which would push up the levy to Sh25 per litre. 

The levy currently stands at Sh18 per litre of super petrol and diesel, raking in nearly Sh100 billion annually, and has doubled from Sh9 per litre in 2010. 

It was initially adjusted in 2014 to Sh12 then to Sh18 per litre in 2016.

The levy is distributed among the various agencies in charge of roads for maintenance.