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More pain as cooking gas prices set to increase by Sh350

Households will from July 1 pay at least Sh350 more for cooking gas following the introduction of the 16 percent value-added tax on the commodity, adding to the pain of costly energy like fuel and electricity.

This is line with the Finance Act that reinstated value-added tax (VAT) on liquefied petroleum gas (LPG), but delayed the levy for one year to July due to concerns about the cost of living.

The Kenya Revenue Authority (KRA) said it would impose the 16 percent tax at the start of the new financial year in what is set to push it out of the reach of most households struggling with depressed incomes.

Currently, the 13-kilogramme cooking gas retails at Sh2,250, meaning that it would now increase to Sh2,610 when the new tax measures come into force.

Expensive gas will add to rising energy prices that have become a political headache for the government, which was this month forced to keep fuel prices unchanged to defuse public outrage over a monthly review that would have pushed costs to a historic high.

“The effective date of the amendment is 1st July 2021. This means that the supply of liquefied petroleum gas will be subject to VAT at standard rate of 16 percent from 1st July, 2021,” the KRA said in an email response to the Business Daily.

Cooking gas prices haven’t changed much over the past year despite the volatility in the global crude oil market during the period when petrol prices oscillated between a low Sh89.10 a litre in June last year to the current high of Sh122.80.

Kenyan households have since June 2016 been enjoying low cooking gas prices after the Treasury scrapped the tax on LPG to cut costs and boost uptake among the poor who rely on dirty kerosene and charcoal for cooking.

Prices for the 13-kilogramme cooking gas fell to below of Sh2,000 in October 2016 after the Treasury scrapped the 16 percent VAT.

The LPG prices are not controlled unlike other petroleum products and the new tax will fuel fears that dealers could exploit the market forces to their advantage even as international crude prices continue to rise.

The energy regulator in 2010 started controlling prices for diesel, petrol and kerosene to cushion consumers from high prices, blamed on cartel-like behaviour among dealers.

Cooking gas was left to the market forces of supply and demand.

The rise in the cost of cooking gas is expected to pile pressure on families that are struggling to foot daily bills due to job losses and drastic cuts in earnings in the wake of the coronavirus pandemic.

Gas dealers reckon that a jump of Sh350 on LPG prices will be the biggest in more than two decades, and will see the commodity retail at levels last seen in early 2015.

Kenyans on social media have recently raised concern over reduced cash flow, fewer employment opportunities and mounting public debt, which triggered a petition to the International Monetary Fund (IMF) to stop giving the country more loans.

The petition from the Kenyans on Twitter  –  also known as KOT – came days after the IMF approved a $2.34 billion (Sh250 billion) loan on April 2 to help the country respond to the Covid-19 pandemic and address its debt vulnerabilities.

Kenya was hit hard at the onset of the pandemic, but its economy has been picking up after posting a slight contraction of 0.1 percent in 2020, the IMF said.

Policy makers and politicians are taking notice of the online campaigns by ordinary Kenyans concerned about how the State coffers are handled as politicians start campaigning for next year’s elections.

This is what informed the State to keep the monthly prices unchanged and cut the oil marketers’ margin, which has been regulated by the State since 2010, with the promise of compensations estimated at Sh1.7 billion.

Were it not for the last-minute changes in the monthly review, petrol prices would have increased by Sh20.12 a litre over the past three months, with diesel up Sh13.56 over the same period.

Recent price increases sparked anger among Kenyans, with the costly fuel unleashing pricing pressure across the economy and having ramifications on the cost of living measure.

Gas has become the preferred energy source for households that can afford it in major towns due to its convenience and because it is cleaner than other cooking fuel.

Official data from the 2019 census shows that 53 percent of homes in urban centres rely on LPG for cooking compared to 5.6 percent of rural households.