oil and gas

Tanzania cuts fuel pump prices while Kenya falters

October 11, 2021

Kenyans face another fuel price shocker this week as MPs dilly-dally in tabling legislative changes to cushion consumers from price increases against a backdrop of excessive government taxes and soaring crude oil prices in the international market that hit a three-year high of $83 per barrel last week.

This comes as regional counterparts such as Tanzania reduced and abolished certain fuel taxes, and reviewed the methodology of taxing bulk fuel imports to reduce the price of petroleum and petroleum products to lower the cost of living and put the country on a strong path for industrial growth and investments.

Kenya’s energy regulator Energy and Petroleum Regulatory Authority will on October 14 announce new fuel prices for the period October 15 to November 14 with fears that the prices could remain at the elevated levels or rise.

On September 14, the price for the commodity rose to a historic high with the problem compounded by the government’s removal of a subsidy designed to protect consumers from high fuel prices.

The government removed monthly subsidies of Ksh7.1 ($0.06) per litre of super petrol, Ksh9.89 ($0.08) per litre of diesel and Ksh11.36 ($0.10) per litre of kerosene, pushing fuel prices to an all-time high.

Last week, the Parliamentary committee on Finance and Planning which had been tasked to review the necessary legislations to bring down the cost of fuel within 14 days asked for seven more days to complete the work arguing that it also needed to probe the demurrage costs on fuel vessels at the port of Mombasa in order to dismantle cartels of dealers preying on consumers.

The committee has recommended reduction of value added tax (VAT) on fuel to four percent from eight percent and reduction in petroleum development levy to Ksh2.90 ($0.02) from Ksh5.40 ($0.04) per litre of fuel.The committee also recommended reduction in gross margins for oil marketing firms to Ksh9 ($0.08) from Ksh12 ($0.10) per litre of fuel and that the inflation adjustment on excise duty imposed on fuel imports for this year be suspended. It also wants this inflation adjustment on fuel taxes to be done after every two years.

Barely two weeks ago, the Kenyan High Court suspended implementation of the annual inflation adjustment levy of 4.97 percent, which would have seen a further increase in prices of fuel with effect from October 1.

Adverse effects

The Senate said the increase has impacted on the economy, raising the cost of living and cost of doing business on already overburdened citizens grappling with the effects of Covid-19. “This increase has outraged Kenyans who bear the brunt of the effects of the increase such as higher costs of transportation, higher food prices, high cost of electricity and other adverse effects on most sectors of the economy,” according to the Senate’s Order Paper for September 23, 2021.

Inflation rate for August increased to 6.57 percent from 6.55 percent in July caused by a sharp increase in the prices of food and cooking gas fuel, according to the Kenya National Bureau of Statistics.“We have talked about the difficulties of increasing the cost of doing business and what that big jump in fuel prices will do is that it will now cause a situation where everything else goes up,” said Mike Macharia, chairman of the Kenya Association of Hotelkeepers and Caterers.

In Tanzania, the government reviewed the levy on the use of port infrastructure (wharfage) charged at $10 per metric tonne plus VAT. The levy will now be charged in Tanzania shillings and was reduced to Tsh15 from Tsh22 with no VAT.

“Part of this was for building the marine oil receiving buoy and so the proposed amount of Tsh15 ($0.01) per litre can be used for maintenance,” said Godfrey Chibulunje, Energy and Water Utilities Regulatory Authority Acting Director General. Tanzania Revenue Authority’s Customs processing fees will be charged Tsh20 million ($8,651.71) per shipload, doing away with the Tsh4.8 ($0.002) per litre.

The country receives seven shiploads of fuel every month. The same will also be applied to the charges levied by the Weights and Measures Agency, from Tsh1 ($0.0004) per litre to Tsh7 million ($3,028.10) per shipload. The government also abolished service levy charged on bulk fuel storage facilities run by oil companies. The levy charged to check fuel purity was reduced to Tsh7 ($0.003) from Tsh14 ($0.006) per litre.


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