Uhuru Kenyatta makes pitch for Raila's election with Sh16b fuel subsidy

President Uhuru Kenyatta with ODM leader Raila Odinga after a meeting at the KICC, Nairobi, in April 2022. [David Gichuru, Standard]

The fuel subsidy has evolved to become a campaign tool for President Uhuru Kenyatta as he pitches for Azimio la Umoja One Kenya Alliance presidential candidate Raila Odinga.

Yesterday, for the first time, Uhuru’s office appeared to usurp the role of the Energy and Petroleum Regulatory Authority (Epra), announcing pump prices and the measures put in place that saved motorists from paying Sh210 per litre of petrol.

State House said the President had authorised an additional Sh16.68 billion to be used for the fuel subsidy.

This brings the total amount that the government has spent cushioning Kenyans from high cost of fuel to Sh101.85 billion since April last year.

The intervention ensured that prices of super petrol, diesel and kerosene continued to retail at the same rate as in the last 30 days.

With less than a month to the August 9 elections, Uhuru’s administration was forced to stretch its finances by announcing a subsidy of Sh50 for super petrol, Sh53 for diesel and Sh53 for kerosene.

In the case of petrol, which is consumed by most vehicles on the road, the subsidy is more than twice what the government had given over the June-July pricing cycle at Sh25.56.

Following the intervention, Kenyans will continue paying a subsidised Sh159.12 for a litre of petrol in Nairobi compared to the actual cost of Sh209.95, according to computations by Epra.

Diesel will continue retailing at Sh140 compared to the Sh193.70 per litre that is supposed to be its actual price, while kerosene will retail at Sh127.94 rather than Sh181.16.

Uhuru, who is supporting Raila in the polls, is careful not to further rattle Kenyans with a heavier burden of high prices.

As a result, he seems to have taken far-reaching measures aimed at stabilising prices of basic commodities, including fuel, maize, fertiliser and animal feeds.

“As a caring government, we will continue to roll out similar actions so as to provide further direct relief to all Kenyan families and establish the necessary safeguards for protecting Kenyan consumers from further increases in the cost of living,” said State House Spokesperson Kanze Dena in a statement announcing the prices.

Epra later sent its usual notice with computations of the prices for the next 30 days.

Diesel will continue retailing at Sh140. [File, Standard]

 

“With today’s presidential action, diesel will continue to retail at Sh140, petrol at Sh159.12 and kerosene at Sh127.94,” Dena said.

“Without such state interventions, the pump prices would have been Sh193.64 for diesel, Sh209.95 for petrol and Sh181.13 for kerosene.”

The cost of living has turned into one of the major campaign issues, with the heat being directed at Uhuru’s government, and by extension Raila.

Kenya Kwanza Alliance, whose candidate is Deputy President William Ruto, has used the high prices to attack Uhuru and Raila, saying the two have not been able to cushion Kenyans against economic hardship in the last five years since their famous handshake.

A recent poll by Trends and Insights for Africa (TIFA) showed that half of Kenyans were unhappy with the high cost of living, with Raila’s supporters feeling the pinch more.

Nearly 60 per cent of those supporting other candidates also decried the high cost of living.

Spending Sh101.85 billion since April last year in subsidising motorists from the higher cost of fuel has meant the State digging deeper into its coffers.

The subsidy faces an uncertain future, with both the National Treasury and the Petroleum ministry having said in the past that the relief is not sustainable.

The government uses funds collected through the Petroleum Development Levy, a kitty where motorists pay Sh5.40 for every litre of diesel and petrol they purchase.

The collections are, however, way below the money the government spends every month in cushioning motorists at the pump.

The National Treasury, in the audited accounts for the Petroleum Development Levy Fund (Holding Account), said the fund collected Sh26.1 billion over the financial year to June 2021.

Treasury CS Ukur Yatani. [File, Standard]

This translated to a monthly collection of about Sh2.2 billion every month.

The government has, however, been spending about Sh4 billion on average every month and higher than Sh8.5 billion in recent months as fuel prices went up sharply, which meant that it had to subsidise by huge margins.

This is especially so over the last couple of months where, for instance, in the pricing cycle beginning today, the subsidy for across the three products will be over Sh50 per litre. Treasury has indicated that it would wind down the fuel subsidy, saying it was becoming a burden to taxpayers.

“For this reason, a gradual adjustment in domestic fuel prices will be necessary in order to progressively eliminate the need for the fuel subsidy, possibly within the next financial year,” said National Treasury Cabinet Secretary Ukur Yatani in a statement recently.

He argued that the subsidy was not well designed and tended to benefit the rich, closing ranks with the International Monetary Fund (IMF) which had earlier called for the scrapping of the subsidy for being retrogressive.

The fuel subsidy, which is among the few in the region, has afforded Kenyans cheaper fuel compared to their peers in Uganda, South Africa, Zambia and Rwanda.

Other than the fuel subsidy, the government has also tried to stabilise prices of fertiliser through a subsidy programme and maize by removing import duty and levies on the cereal.