Govt at fault over fuel prices – Cofek

September 19, 2012
Doreen Amukonyi, a mother of two, works as a house help and says she has to pay slightly over Sh80 a litre for kerosene in Kibera where she lives/FILE

, NAIROBI, Kenya, Sept 19 – The move by the Energy Regulatory Commission (ERC) to increase fuel prices last week, set consumers off balance, after two consecutive months of reprieve.

With inflation rates having eased to 6.09 percent last month and the Central Bank’s cut to its key lending rate by 350 basis points to 13 percent, the ERC’s move has been criticised as retrogressive.

In the regulator’s latest fuel price review Super petrol in Nairobi went up by Sh2.47 to sell at 108.95, diesel by Sh3.99 to retail at Sh101.07 and kerosene to retail at Sh79.65 after going up by Sh5.68. It attributed the increase to an upward trend in the price of crude and refined petroleum products in the international market over the last three months.

“The ERC should have worked with the Treasury to absorb some of the recent fuel adjustments since they will erode the gains already made on inflation. They will result in higher electricity and with it the resultant increase in transport and food prices,” Consumers Federation of Kenya (Cofek) Secretary General Stephen Mutoro said.

Mutoro added that the steep increase in the cost of kerosene, which is widely used by poor households, inevitably means they will have to part with more to cushion the non-poor, who mostly use petrol, which had a lesser adjustment.

Doreen Amukonyi, a mother of two, works as a house help and says she has to pay slightly over Sh80 a litre for kerosene in Kibera where she lives.

“I usually buy paraffin in small quantities, so Sh50 lasts me two days to boil water, cook and light my kerosene lamp,” she said.

Doreen said the price hike had impacted her purchasing power because everything is heavily budgeted, so even if food prices and other commodities don’t go up she still has to add the cost of kerosene to her daily activities including transport.

“What may seem to others like a Sh10 increase sets things off and that’s where the expense lies. A lack of Sh10 can make a difference between a cooked meal or not. When prices go up people are depressed and wonder why they (government) don’t seem to have mercy,” she explains.

Razia Khan, the Regional Head of Research for Africa at Standard Chartered Bank PLC says Kenya needs to be cognisant of its heavy dependence on oil imports and the pressure it is putting on the widening Current Account Deficit (CAD).

Late last year the local unit plummeted to a low of Sh107, based largely on the pressure from the CAD, a scenario Khan says the country cannot afford to repeat as it will impact inflation and hence food prices.

“There are structural issues that keep food prices in Kenya relatively high and as a result of exchange rate depreciation you will see a much greater impact with the poor disproportionately hit by any inflation that stems from that and with Kenya being a net grain importer it is not a comfortable situation to be in,” she said.

Cofek currently has a case in court seeking to compel the government to stabilise and reduce high fuel prices.
The lobby group took the ERC and several oil marketers to court over high fuel costs which have negatively affected inflation and the cost of living, with another hearing set for October 31.

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