What you need to know:
- Under the initial subsidy scheme, the beneficiaries were to pay a discounted price of Sh2,000 in three years.
- Revival of the subsidy would come as a major relief for households pressured by high prices of the commodity.
The National Treasury has revived the stalled subsidy scheme for affordable cooking gas, with a Sh471 million allocation for the new financial year starting July. The amount will be raised to Sh820 million in the 2023/24 financial year.
This marks a massive 203 per cent rise compared to the current financial year where Sh155 million had been allocated.
Treasury Cabinet Secretary Ukur Yatani in a draft budget released last November included a plan to distribute 300,000 six-kilogramme LPG cylinders to low-income households over the next three years.
Under the initial subsidy scheme, the beneficiaries were to pay a discounted price of Sh2,000 in three years for the burner and cylinder, with refills pegged at Sh840 at the time.
The revival of the LPG subsidy would come as a major relief for households pressured by the present high prices of the commodity.
LPG is 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 fuels.
Reliance on kerosene
Costly crude oil in the wake of the Russian invasion of Ukraine, the imposition of value-added tax (VAT) and the search for higher margins by dealers have combined to send cooking gas prices to their highest level in Kenya’s history.
Presently, the 13kg cylinder retails at Sh3,400 from Sh2,250 in June before the government imposed the 16 per cent tax at the start of the current financial year. The six-kilo cylinder is retailing at Sh1,600 from Sh900 in June.
The cooking gas subsidy introduced by the Energy ministry in the 2016/2017 financial year was aimed at cutting reliance on kerosene and charcoal.
Its implementation was hindered by suppliers who provided faulty cylinders. A report on the multibillion-shilling project revealed that more than a third of the LPG cylinders were sub-standard, including having faulty valves that posed a fire risk.
The plan was also adversely affected by distribution challenges at the state-owned National Oil Corporation (Nock).
Components of LPG project
Mr Yatani in his draft budget statement for 2022/23 said Treasury targets to fund the supply of at least 300,000 cylinders. This number is nonetheless a fraction of the four million targeted initially.
“Over the next three fiscal years, the government will strengthen enforcement of provisions of the Mining Act 2016, the Petroleum Act, 2019 and other extractive policies for well-coordinated oil, gas and mining sub-sectors [and] distribution of 300,000 six-kilo cylinders to low-income households,” Mr Yatani said.
The plan to revive the subsidy comes at a time cooking gas has been retailing at six-year highs after Treasury reintroduced a 16 per cent VAT on the commodity on July 1.
Nock piloted the project in October 2016 in Machakos and Kajiado counties but ran into difficulties when the Auditor-General found that Sh870 million had been spent with no value to taxpayers.
It also emerged that contractors supplied 67,251 faulty cylinders, out of more than 200,000 that were delivered.
The audit showed that 10 firms had been contracted by the ministry in May 2017 to supply components of the LPG project at an aggregate cost of Sh1 billion. According to the Economic Survey 2021, LPG use recorded a 4.5 per cent rise to 326,200 tonnes in 2020.