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Fare, electricity prices to go up as Parliament increase VAT on fuel

Prices of basic commodities are expected to go up from July 1, 2023, after Parliament voted to pass the proposed 16 percent Value Added Tax (VAT) on fuel.

Some 184 MPs voted to increase the VAT from 8 per cent to 16 percent, while 88 voted against it.

Under the proposed Finance Bill 2023, the VAT on petroleum products has been doubled, which is likely to result in an overall increase in the prices of basic commodities.

The repercussions of this decision will be felt not only in the transport sector but also in the prices of goods that are transported to the market.

This will include the fare and electricty cost.

The Energy and Petroleum Regulatory Authority (EPRA) recently announced new prices of petrol, diesel, and kerosene for the period between June 15, 2023, and July 14, 2023.

In the latest review, the maximum retail price of Super Petrol and diesel experienced a slight decrease, with a drop of Sh0.66 and Sh1.22 respectively. However, kerosene prices have seen an increase of Sh0.35.

Currently, in Nairobi, petrol is being sold at Sh182.04, while diesel has dropped to Sh167.18. On the other hand, kerosene prices have soared to Sh161.48.

These figures reflect the impact of the existing market conditions and the new VAT on petroleum products is expected to further push up these prices with petrol expected to retail at around the Sh200 mark a litre.

The burden will be felt particularly by low-income households, who heavily rely on kerosene for cooking and lighting purposes.

In September 2022, President William Ruto removed fuel subsidy saying it was unsustainable.

The Head of State has however justified the increase in tax, saying the 16% VAT will ensure uniformity.

Also read: Ruto defends CS Moses Kuria amid media backlash