Fuel prices killing Kenyans as Treasury sits on Sh20b meant to subsidise the commodity

Energy and Petroleum Regulatory Authority (EPRA) Director-General Daniel Kiptoo when he appeared before Finance and National Planning Committee in Parliament yesterday regarding the increase in prices of petroleum products. [David Njaaga, Standard]

The National Treasury is sitting on more than Sh20 billion meant to cushion Kenyans from high fuel prices, even as the cost of the commodity rose level not had before. The money was collected through the Petroleum Development Levy, which was increased to Sh5.40 per litre of petrol and diesel from 40 cents last year.

In the financial year to June 2021, the levy may have raked in more than Sh25 billion, going by fuel consumption patterns. The money collected through the levy goes to a pump price stabilisation kitty meant to tame high petroleum prices.

Despite collecting the billions of shillings, the government has only spent Sh8.67 billion to cushion Kenyans from the high cost of fuel.

The Energy and Petroleum Regulatory Authority (Epra) told Parliament yesterday that the government spent the money between May and September through the fuel stabilisation programme, which, however, was not part of the September-October pricing cycle.

The withdrawal of the subsidy saw pump prices rise to historical highs, while the billions designed to support the subsidy programme remained unused in government coffers.

Daniel Kiptoo, Epra Director-General, said the money was spent over the five pricing cycles beginning April 15 and ending September 14. He, however, could not explain why the subsidy programme was halted, instead saying the Petroleum Ministry and Treasury had the answers.

“This is a policy matter, and as the regulator, apply the law as is. We are not in a position to answer why… the right person to answer the question would be the Ministry of Petroleum and the National Treasury,” Mr Kiptoo told the National Assembly’s Finance and National Planning Committee.

Epra was also unclear as to the source of the funds used for the stabilisation programme, noting that it was working with the ministry on regulations to enable government to draw from the PDL Fund.

Without the enabling legislation, the government cannot withdraw funds from the kitty. The Authority was also not clear on how much the kitty had collected.

Gladys Wanga, the Finance and National Planning Committee chairperson, estimated that the fund may have collected more than Sh25 billion in the financial year to June this year. She sought to know whether the money had been spent elsewhere.

"My quick calculation on how much may have been collected over 2020/21… it is about Sh25 billion. Is there any other time that the stabilisation fund has been used other than the Sh8.6 billion, because it means that we could be having more money in the fund that could have been used for stabilising pump prices? Kenyans did not have to (grapple with high fuel prices) because we could have easily applied this amount that has been collected through PDL,” she said.

Abdulswamad Nassir, the National Assembly’s Public Investments Committee (PIC) chairperson, who was also present when the Finance and National Planning Committee met with Epra, estimated that the PDL Fund may have collected more than Sh30 billion.

Responding to questions on what could be done to lower the cost of fuel, Kiptoo said there was an opportunity to review the taxes. At the moment, the nine taxes and levies charged on petroleum products are almost at par with the product cost when the fuel lands in Mombasa.

Over the September-October pricing cycle, the landed cost for a litre of petrol was Sh60.35, while the total taxes are Sh58.81.

"There is an opportunity to relook the taxes, bearing in mind the outcry from Kenyans and also the escalation in international prices. This is the purview of the Parliament,” said Kiptoo, adding that there was little that the country could do about the landed prices, but other cost centres were within the control of the different players in the petroleum sector.

“What is within our control are the margins (for oil marketing companies), the taxes and storage and distribution. The biggest contributor is the taxes, which are within the purview of the government and Parliament," he said.

Kenya has the highest taxes on petroleum products such that retail prices for fuel are the highest in the region. Kenyans are paying more for fuel than Ugandans and Rwandans.

A litre of petrol in Kigali, Rwanda, is the cheapest in the region, at Sh118.45. This is despite the city being farthest from the ports of Mombasa and Dar es Salaam, which the country uses to import petroleum products.