Nairobi News

HashtagMust Read

Epra defends itself over fuel price hike, blames formula

The energy regulator has come out to defend itself following a public uproar resulting from the latest shocking increase in fuel prices.

The hike has seen the price of petrol shoot above the Sh120 mark per litre, pushing it to nine-year high at a time when Kenyans are grappling with the effects of the Covid-19 pandemic amid a third wave.

This has put pressure on the Energy and Petroleum Regulatory Authority (Epra), which is legally mandated to announce monthly fuel price reviews, with demands to reverse the shocking increments and to suspend the new prices.

Following the uproar, the agency Tuesday argued that it determines the prices using a predetermined formula, which is enshrined in law.

Epra said pricing of petroleum in Kenya is undertaken in accordance with the Energy (Petroleum Pricing) Regulations, 2010, adding that the country imports refined petroleum products for local consumption.

Incremental costs

“The Regulations detail a formula for determining the landed cost of imported petroleum products and thereafter other costs along the petroleum supply chain are added to arrive at the pump price,” Epra said in the statement.

“Such incremental costs include storage and distribution costs, supplier margins and taxes and levies,” the statement reads.

It added that importation of super petrol, diesel and kerosene into Kenya is undertaken through the Open Tender System (OTS) pursuant to Legal Notice No.24 of 2012.

For the January to March 2021 period, the agency said average landed cost of imported super petrol increased by 38.41 per cent from Sh36.01 per litre to Sh49.84 per litre. Diesel increased by 26.68 per cent from Sh36.96 per litre to Sh46.82 per litre while that of kerosene increased by 27.97 per cent from Sh33.57 per litre to Sh42.96 per litre.

Taxes and levies contributed 46.68 per cent of the pump price of Super petrol in March 2021, 42.23 per cent of that of diesel and 40.42 per cent of that kerosene.

The explanations come at a time when pressure continues to mount on the agency to set aside the prices announced on Sunday.

Most expensive fuel market

The new prices have made Kenya the most expensive fuel market in the region, which risks pushing up the costs of production and making locally produced goods uncompetitive.

It is also now cheaper for a motorist to buy litre of petrol in Kampala and Dar es Salaam than in Nairobi now by up to Sh30, following the review that has also exposed the hypocrisy among Kenya’s political class.

This is despite the fact that to get fuel to Uganda, a landlocked country, an importer has to ship their cargo through Kenya’s main port of Mombasa. The importer then pays various levies and fees at the port, before transporting the cargo by road or pipeline for more than 1,165 kilometres through the Malaba or Busia border.

But despite these additional storage and transportation costs, when this fuel arrives in Kampala, it is retails at cheaper prices.

A spot check by the Nation in Kampala on Monday showed that petrol was retailing at Ush3890 per litre, which is equivalent to 116 Kenya shillings.

This is at least Sh6.5 cheaper for every litre compared to what motorists in Nairobi are paying. This is despite Uganda not having a fuel price control regime like Kenya, which is expected to protect consumers from high prices.

Motorists in Dar es Salaam are the happiest in the region, given that they are now buying a litre of super petrol at Tsh1981. This is equivalent to 93.67 Kenya shillings, which means that petrol in Tanzania’s capital is cheaper by at least Sh29.14.

The same pattern is reflected on other petroleum products among them diesel and kerosene in both Uganda and Tanzania.

Kenya and Tanzania share many similarities in the oil pricing. They both have a port and both have price controls on fuel, which cap the margins for oil marketers.

Tax burden

However, a plethora of taxes imposed on the commodity has spoilt the party for the Kenyan consumer, who carries the heaviest burden.

After Sunday’s fuel price review by Epra, motorists in Nairobi are now buying a litre of petrol at Sh122.81.

Epra increased super petrol by Sh7.63 per litre, diesel by Sh5.75 per litre and kerosene by Sh5.41 per litre, pushing the fuel prices to a nine-month high.

The double-digit increase, which is the fourth consecutive rise in the last four months, is set to push up the cost of transport, electricity and manufactured goods.