State tasked over high fuel prices

Fuel pump at a petrol station in Nairobi on May 14, 2020 [Elvis Ogina,Standard]

The government has been hard-pressed to explain the rationale behind the high cost of fuel pump prices in the country despite continued outcry by consumers. 

The Senate Energy Committee implored officials in the Mining and Energy Ministry and the Energy and Petroleum Regulatory Authority (Epra) to provide a lasting solution to the problem. “We’ve had about four or five meetings dealing with the same issue and it came out that the major component was taxes and levies, which were contributing the highest percentage in terms of pump pricing,” said committee chairman Ephraim Maina. 

“As you go on increasing taxes, do you have a solution you could mention to ensure that wananchi are cushioned against this periodic, almost monthly increase in prices,” added the Nyeri Senator. Earlier this month, Epra announced that prices for super petrol, diesel and kerosene would remain unchanged between July 14 and August 14. 

The decision came following a public outcry after the cost of the three fuels hit new highs at Sh127, Sh107 and Sh97 respectively in the preceding monthly pricing guide by the industry regulator. 

Epra Director General Daniel Kiptoo said the regulator has used the Petroleum Development Levy to subsidise oil marketers and cushion consumers against higher prices in the last two price reviews. 

“The Petroleum Development Levy Act allows the Cabinet Secretary to operationalise the regulation and give direction to the accounting officer, who is the principal secretary to operationalise the fund,” explained Kiptoo.

“From the month of April, that fund has been used to stabilise the prices despite the international crude oil prices having gone up, and we’ve been able to hold the prices constant over the last two price cycles,” he said.

Kiptoo, however, could not respond to questions over how much has been collected by the fund to date and how much was used to subsidise the oil marketers in the two previous price cycles. 

In July last year, Epra increased the Petroleum Development Levy to Sh5.4, up from Sh0.4.

But there are concerns that the lack of a clear legislative framework on the administration of the levy could see taxpayers pay more for fuel while subsidising the margins of oil marketers. 

“We would like to know why the legislation the ministry promised to bring to the House by May is yet to come forth,” said committee chairman Maina. 

Epra boss Kiptoo said the regulations were only meant to introduce a governance framework but added that the law allowing the fund to be operational is already in place.

“The Petroleum Act, 2019 and Energy Act, 2019 actually places the responsibility of advising the CS on regulations and development of regulation on the regulator,” he said.

“Those regulations are with us as EPRA and we are in the process of conducting public participation which is a requirement so we can advise the CS who will then assent to the legislation that will come to your committee,” he said. 

The regulator said the recently imposed VAT on liquified petroleum gas has the potential to roll back the gains made in ensuring access to clean cooking energy.

According to submissions from the regulator, the levies contribute the highest portion of pump prices of super petrol and is the second-largest contributor to the cost of diesel and kerosene.