Govt to control fuel prices in 2 weeks

October 29, 2008
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, NAIROBI, October 29 – The government on Wednesday moved a step closer to reintroducing fuel price controls, when it announced intent to limit profits to seven percent.

Energy Minister Kiraitu Murungi said in Parliament that the Energy Regulatory Commission would publish a legal notice to that effect in two weeks.

He explained that the notice would bar oil companies from selling the commodity at more than seven percent of their total cost. He told Members of Parliament (MPs) that the government’s pleas to oil companies to sell fuel according to international prices had largely been ignored and it was time to act.

“Even the President called for a reduction of prices by more than Sh10. I did not act previously because I thought we had moved away from era of price controls,” said Mr Murungi.

MPs had put the Minister to task, wanting to know why he had not used powers conferred on him by the Energy Act to regulate fuel prices in the country.

“The government only threatens yet the cost of living has gone up due to the fuel prices,” said Githunguri MP Njoroge Baiya.

The MPs who adjourned normal House business to debate the high costs of fuel said they were ready to pass the necessary legislation to enable the minister better regulate the oil industry in future.

At the same time the Minister announced plans to push for the National Oil Corporation of Kenya (NOCK) to import 30 percent of the country\’s fuel requirements. He revealed that NOCK was also working to increase its market share by purchasing 86 petrol stations from Caltex.

As the Minister spoke, economist Joe Donde supported introduction of a pricing policy saying it would be the best way to regulate the energy sector and any other that has monopolistic tendencies.

“This is what is happening in Europe where the Minister for Finance brings the price of things down during the budget, when he gives an indication on what the retail price should be. He doesn’t just say that I have zero-rated (maize flour) and then the next day everyone goes to the shop and the unga is still the same price,” said Mr Donde. “He says I have zero-rated unga and from tomorrow it should be selling at this price per packet.”

The former MP told Capital Business in an exclusive interview that during his tenure in Parliament he had warned that liberalisation of the markets without regulation would result in the current problems the country is facing where players would operate with impunity and total disregard for the common man.

He further rubbished the argument that there should be no control in a liberalised market noting that this is what had led to the current meltdown in Europe and America.

“Even in a liberalised market you have to have a strong regulatory body. It doesn’t mean that just because a market is liberalised that anybody can do what they want,” Mr Donde noted. “For instance from the word go the Electricity Regulatory Commission should have decided on exactly how the price of fuel would have been tabulated using a standard formula.”

Mr Donde said this should then be followed through by the Minister in charge looking at the pricing structure and then stating the maximum and the minimum price for the product.

“For instance this is what the European Union did with the price of airtime and nobody is saying that this is price control but regulation by the government who should have the final say,” Mr Donde said.

Donde is urging the Finance and Energy Ministers to implement these provisions in the various Acts and stop wasting the tax payer’s money on media campaigns that may not be yielding the necessary results.

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