Agony for city motorists as fuel price rises by Sh3
Motorists are expected to dig deeper into their pockets from Friday as pump prices are set to go up. This is because the energy regulator wants a road maintenance levy.
Fuel prices will go up by Sh3 a litre for petrol and diesel from midnight on Friday, as the full burden of the government’s road expansion plan begins to bite.
Last week, the acting director for petroleum, Mr Edward Kinyua, said the Energy Regulatory Commission had got a go-ahead from the taxman to charge an extra Sh3 for every litre of fuel. The money will be used to maintain roads.
“The consignments that came in from July 17, which is within our pricing window starting every tenth, will be affected by this levy. There will be no backdating as previously alleged and we will compensate the importers who already paid the levy in the post-July 17 consignments,” Mr Kinyua said.
The fact that importers already incurred the costs on some of the fuel already used implies that the compensation will come from higher pump prices that motorists must pay in the coming months.
In the 2015/16 Budget, a Sh3 road maintenance levy was proposed with effect from July 1. The Kenya Revenue Authority said the effective date for the new tax is July 17.
The additional levy comes at a time when the government is finalising plans to introduce toll stations on some major roads such as the southern by-pass, Mombasa Nairobi highway and Thika Superhighway.
The strategy has been in the works since February last year, but has been criticised by lobby groups and consumers who insist that is double taxation.
The push to increase the charge on fuels started in December last year when the Kenya Roads Board called on the Treasury to double the petroleum levy from the current Sh9 to Sh18.
At the moment, the total tax per litre of petrol is about Sh30, diesel Sh20, and Sh2.20 on kerosene. In essence, the price of petrol, diesel and kerosene is almost the same before taxation, indicating how taxes distort market prices.
The consumer also pays Sh0.40 per litre to the Petroleum Development Fund. These taxes are usually in addition to 1.5 per cent railway development levy that is imposed on all imports.
The higher fuel cost from tomorrow is likely to have a ripple effect on inflation as both food and transport prices are likely to increase.