Extra drop in fuel costs coming

April 27, 2011 12:00 am

, NAIROBI, Kenya, Apr 27 – The government has bowed to public pressure and moved to cushion vulnerable Kenyans against rising cost of living, with Prime Minister Raila Odinga announcing a further reduction on the price of kerosene by Sh5.66 per litre.

He told Parliament on Wednesday that the government had removed all taxes and levies on kerosene, following an earlier 30 percent cut on excise tax announced last week by Deputy Prime Minister Uhuru Kenyatta.

However the measures announced on Wednesday will require Parliament\’s approval through a Motion to be tabled in the House next week.

Mr Odinga told Parliament that the decision was reached because increased food prices were responsible for the 60 percent of the total inflation in the country.

"The Minister for Finance introduced measures that were taking effect immediately. The measures that I have announced here require Parliamentary sanction and that is why we will be coming with a Bill to zero-rate kerosene. As soon as that is done, then (the measures) will be implemented," he said.

This means that once the new prices take effect, a litre of kerosene, which is used by poor households for cooking and lighting, will now retail at Sh83.25 in Nairobi, Sh92.59 in Lokichogio and Sh95.77 in Mandera.

The Prime Minister told Parliament that the government had also reduced the profit margin on kerosene, diesel and petrol from Sh6 per litre to Sh4.

This means that the prices of these commodities will come down further in coming days.

The cost of petroleum products has risen by over Sh15 per litre in the last three months sparking public outrage and demonstrations from civil society activists.

This is because a rise in fuel prices affects every other aspect of the economy.

"Fuel and food prices are inter-related because when the price of fuel goes up all other prices go up. We have established that about 40 percent of the cost of food is attributable to the increase in the cost of transport and that is why we targeted fuel," the premier explained.

To further ease the burden on Kenyans, Mr Odinga said the government would abolish import duty on wheat and maize shipped in by private millers. He directed the National Cereals and Produce Board (NCPB) to provide its storage facilities for use by such millers.

He was quick to assure farmers that they would not be affected by this move but would help to ensure food availability for all. There is an estimated 23 million bags of maize currently in stock which includes about three million bags that is held at the NCPB.     

"Given the high international prices, duty free import of maize and wheat will not adversely affect local farmers. Rather, together with the available stock of maize, private import will make sure that there will be adequate supply of maize throughout the year," he added.

For those living in drought stricken and drought-prone areas, the Government is expanding the famine relief assistance to cover more people and regions. A total of four million people will be covered up from the current 2.4 million people.

A social protection program to support the food insecure in urban areas is also in the works with a Memorandum on the Implementation of a Comprehensive Targeted Food Subsidy currently being before Cabinet. Once this proposal is approved, the government will expand the pilot programmes to providing Sh2,000 per month to 100,000 people in six informal settlements in Nairobi, Mombasa and Kisumu.

The government has been on the receiving end and accused of ignoring the plight of Kenyans many of whom are reeling under the weight of the high cost of living which has gone up from 3.8 percent in November last year to 9.2 percent in March this year.

Attempts to explain that the chaos in North Africa and Middle East was largely to blame for the skyrocketing fuel prices have fallen on deaf ears.

In turn, citizens through such bodies as the Central Organisation of Trade Unions have demanded that the government raise the minimum wage by 60 percent to cushion workers against inflationary pressures.

And while this call has been dismissed by private sector employers, the government has expressed a willingness to consider the request.

"The government has agreed to further increase the minimum wage, to be announced on Labour Day (this Sunday). Such increment should have come after two years, but we will do it now to address the sharp rise in the cost of living," divulged the Premier.

However, he pointed out that in future, the government would employ a structured way that of increasing wages that is based in productivity and not the cost of living.

"Resources are being provided by the Ministry of Labour to set up a productivity centre," he added.

This will be in addition to the development of clean energy so as to reduce dependency on fossil fuels.

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