15 Aug 23

Kenya: government steps in to shield customers from rising fuel prices

Kenya: government steps in to shield customers from rising fuel prices

Due to the steep climb in commodity prices, particularly fuel, the Kenyan government is using a levy to stabilise prices at the pump and shield consumers, such as taxi drivers and last-mile delivery reps, who rely on fuel for their living. 

Yesterday, the Energy and Petroleum Regulatory Authority (EPRA) made an announcement regarding compensation for oil marketers through the utilization of the Petroleum Development Fund (PDF). The compensation rates are Sh7.33 ($0.05) for super, Sh3.59 ($0.02) for diesel, and Sh5.74 ($0.04) for kerosene. However, a statement today clarified that it’s not a subsidy but a levy.

Without this compensation, the cost of one liter of petrol would have risen to Sh202.10 ($1.45) today from its previous price of Sh194.68 ($1.35). The average monthly salary of workers in Kenya ranges from SH30,000-SH150,000 ($280-$1,400). Similarly, diesel prices would have experienced an increase to Sh183.26 ($1.27), while kerosene would have reached Sh175.22 ($1.22).

First published in the Kenyan newspaper CAPITALFM yesterday (14th August), a statement from the EPRA read: “In order to cushion consumers from the spike in pump prices as a consequence of the increased landed costs, the government has opted to stabilize pump prices for the August-September 2023 pricing cycle," read a statement by EPRA.

"Not using public money to subsidize oil companies"

President William Ruto's administration concluded the fuel subsidy program in May, per an agreement with the International Monetary Fund. This decision followed previous increments of Sh3.40 ($0.02) for super, Sh6.40 ($0.04) for diesel, and Sh15.19 ($0.11) for kerosene.

Additionally, beginning in July, the costs of various commodities surged due to the elevation of value-added tax (VAT) on fuels, which escalated from 8% to 16%.

However, today Chief Executive Officer of the EPRA (CEO) Daniel Kiptoo, issued a statement clarifying that there were no subsidies and that the Petroleum Development Levy was being utilised as compensation to stabilize prices.

“What has been applied is stabilization, not a subsidy. The petroleum development levy was put in place to, amongst other things, cushion Kenyans from spikes in petroleum pump prices.” 

He stated that the PDL is a fund for a rainy day, and no public funds have been used.

“We have not applied any exchequer funding, which would be a subsidy, but simply given back to Kenyans their money which we have collected from them in the past,” he stated.

Image of EPRA CEO Daniel Kiptoo, courtesy of EPRA

Authored by: Alison Pittaway