Proposal to make LPG cheaper in Kenya

April 11, 2012
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Finance Minister Njeru Githae said the government's policies have promoted the consumption of LPG in an effort to conserve the environment/FILE

, NAIROBI, Kenya, Apr 11 – The Value Added Tax (VAT) on Liquefied Petroleum Gas (LPG) could be waived if Parliament adopts proposed amendments to the VAT Act by the Treasury.

Finance Minister Njeru Githae said the government’s policies have promoted the consumption of LPG in an effort to conserve the environment.

“LPG will soon become affordable to Kenyans with the commissioning of the LPG import and storage facility in Mombasa due in September. This will further compliment the quick realisation of similar facilities in Nairobi and major towns thereby increasing LPG consumption which is a modern and efficient energy source,” he revealed.

Githae was speaking during the first quarterly luncheon for the Petroleum Institute of East Africa (PIEA) where he also announced with the recent oil discovery in Turkana, it could mean a reduction of the petroleum import bill and have cheaper oil for local consumption.

“We hope to have commercially viable oil in the country. However, in the meantime we will continue with further oil exploration activities in the various exploration blocks in the country with the hope of striking additional and hopefully commercial oil in the future,” he stated.

It is estimated that over 97 percent of Kenya’s nine million households rely on traditional sources of cooking energy, with 68 percent opting to use kerosene, 17 percent using charcoal, 11 percent depending on LPG and four percent on electricity.

The current consumption of LPG in the country is estimated at 90,000 Metric Tonnes (MT) per year and is expected to reach 200,000 MT once the current supply constraints are addressed.

Githae was also called upon to direct the Kenya Revenue Authority (KRA) to refund the Petroleum industry’s taxes due to the reduction on certain fuels last year.

PIEA’s Chairman Rida Elamir stated the industry is at risk of losing millions of shillings if it is not paid within this financial year.

“The industry also has an outstanding refund of taxes due from reduction of taxes on the illuminating kerosene and automotive gasoline in May and June last year. KRA is awaiting the directive to be issued by Treasury or the Ministry of Energy for the payments to be effected. We hope you will pay this financial year, otherwise we risk losses of around Sh300 million,” Elamir affirmed.

Elamir further added that the industry was calling on the government to increase the budgetary allocation for their export refund.

“There is a real necessity for Treasury to increase the current Sh200 million export refund budgetary allocation to meet oil marketing companies’ monthly accumulation. We appeal to you to increase this to prevent the backlogs from further escalating,” he appealed.

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