Temporary relief as ERC spares motorists from VAT on fuel in latest review

August 14, 2018
In Nairobi, a litre of super petrol will retail at 113.73, diesel at Sh102.75 and kerosene at Sh84.95/FILE

NAIROBI, Kenya, Aug 14 – The cost of super petrol has gone up marginally by Sh1.53 and will now retail at Sh113.73 per litre in Nairobi starting midnight today.  

The latest review by Energy Regulatory Commission also sees a decrease in Diesel and Kerosene prices by 51 cents and 78 cents respectively for the next one month.

Motorists had expected a drastic hike of at least Sh17 per litre due to the inclusion of a 16 per cent Value Added Tax announced by the National Treasury that was to take effect from September 1.

National Treasury Cabinet Secretary Henry Rotich has estimated that the VAT would raise Sh33 billion to supplement the country’s budget.

ERC Director General Pavel Oimeke says the August changes in petrol increase has been attributed to a rising average landed cost of super petrol.

“The changes in this month’s prices have been as a consequence of the average landed cost of imported Super Petrol increasing by 3.08 pc from US$738.77 per ton in June 2018 to $761.55 per ton in July 2018,” said Oimeke in a statement.

In Nairobi, a litre of super petrol will retail at 113.73, diesel at Sh102.75 and kerosene at Sh84.95, while the maximum pump price for super petrol in Mombasa has been set at Sh110.42 per litre while diesel and Kerosene will retail Sh99.44 and Sh84.95.

In Kisumu, the retail price of super petrol has been capped at Sh115.64 diesel at Sh104.88 and kerosene at Sh86.83.

Petrol has been exempt from VAT although it is one of the most taxed commodities in the country with about 42 per cent of what is paid for a litre of petrol going to the state in terms of taxes and levies, according to a Parliament finding.

The increase in the VAT was first introduced in 2013 but was deferred in 2016 when the government announced a two-year relief in September 2018 at the earliest.

But it is not clear if ERC will include the VAT in the September review as directed by the National Treasury, and recommended by IMF, but which will have a ripple effect in the cost of doing business.

“I am extremely worried about the expected increase on fuel. As a tax driver, it means my profits will become smaller, or I’ll have to increase the amount of money I charge my customers. It is a loss, either way, I look at it,” Mwaura, a taxi driver based in Nairobi told Capital Business.

His sentiments matched those of Paul, a Nairobi motorist who worried that he would be unable to use his car daily saying the price is too high.

“My vehicle will now become a burden because it is not like my salary has gotten better, on the contrary, an increase on fuel will mean the price of everything will increase,” Paul said.

In March this year, members of the Senate’s Energy Committee questioned the move saying it will dampen economic growth, as higher fuel costs eat into production costs.

“Consumers in far-flung towns will pay even higher prices arising from added costs like transport, the sum of which forms the principal amount on which VAT is levied. It will be a double tragedy for motorists because global oil prices are on the rise, increasing cost for net importers such as Kenya,” Narok Senator Ledama ole Kina, a member of the committee, said.

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