Pain at the pump for Kenyans as Epra increases fuel prices

Fuel prices rise

A filling station attendant fuels a car in Nairobi on September 14, 2021. Fuel prices have gone up in the latest monthly review by Epra with petrol retailing at Sh134.72 per litre in Nairobi.

Photo credit: Dennis Onsongo | Nation Media Group

Kenyans face tough economic times beginning Wednesday following a sharp rise in fuel prices that will drive up costs in almost all sectors.

The Energy and Petroleum Regulatory Authority (Epra) Tuesday announced that pump prices for super petrol, diesel and kerosene would increase by Sh7.58, Sh7.94 and Sh12.97 per litre respectively.

The steep rise in prices will see some motorists pay up to Sh137 per litre for super petrol, with the price for the product being Sh134.72 in Nairobi and Sh132.46 in Mombasa.

In Nakuru, petrol will retail at Sh134.24 per litre and Sh135.13 in Eldoret town.

Stabilisation fund

Epra said the jump in prices was due to the lifting of the stabilisation fund which had cushioned consumers from previous increases.

“The stabilisation process for the pump prices has not been effected this pricing cycle," Epra Director-General Daniel Kiptoo Bargoria told the Nation.

This is the highest increase of the fuel prices so far and for the first time, the cost has crossed the Sh130 mark.

“The prices are inclusive of the eight per cent value added tax (VAT) in line with the provisions of the Finance Act, 2018, the Tax Laws (Amendment) Act, 2020 and the revised rates for excise duty adjusted for inflation as per Legal Notice No. 194 of 2020,” Epra said in a statement.

The regulator said the average cost of imported super petrol decreased by 0.72 per cent from $548.36 per cubic metre in August, diesel decreased by 4.81 per cent from $514.25 per cubic metre to $489.51 per cubic metre while Kerosene increased by 0.96 per cent from $493.45 per cubic metre to $498.19 per cubic metre.

“Over the same period, the mean monthly US Dollar to Kenyan Shilling exchange rate depreciated by 1.11 per cent from Sh108.26 per US$ to Sh109.46 per US$ in August 2021,” it stated.

Ripple effect

Any shift in fuel prices has a ripple effect on the economy, since the product is widely used by critical sectors of the economy.

Thousands of motorists across the country consume millions of litres of petrol daily.

On the other hand, diesel is used by manufacturers as well as farmers who use heavy machines such as tractors.

With many households still poor, kerosene is also used widely across the country for lighting and cooking, and any change in the product’s price hits the low-income earners hard.

With fuel also having an impact on electricity production, the cost has also always been passed on to consumers, increasing power costs and the cost of manufacturing goods.

Kenya’s year-on-year inflation rate has been on a rise since April when it was 5.76, closing at 6.57 by the end of August. This was from a revised rate of 6.55 in July and the rate was the highest in February 2020 when it hit 7.17.

The rise in inflation always has an effect on the cost of consumer goods.

More rise expected

But even with the latest announcement, Kenyans should brave for a rise in the fuel prices in two weeks’ time, since the Kenya Revenue Authority has already announced plans to increase excise duty for a number of products to cover for the 2020/21 inflation, in a move that will see taxes for premium and regular gasoline and kerosene, among others, go up.

KRA on August 10 announced new excise duty rates that are to apply beginning October 1, 2021.

The authority said the adjustment was meant to take into account the rate of inflation and are subject to approval by Treasury Cabinet Secretary.

In the price reviews, KRA targets to increase excise duty rates for regular motor spirit (gasoline) from the current Sh21,522.68 to Sh22,592.36, or by Sh1.069 per litre.

On the other hand, the taxman will also rise excise duty on premium motor spirit (gasoline) by Sh1.091 per litre, as duty rates for 1,000 litres of the product rise by 4.97 per cent to Sh23,044.09.

A litre of kerosene will also have duty rates charged on it rise by Sh0.565 in the next two weeks.

Excise duty for 1,000 litres of the commodity will now be charged Sh11,936.12, up from the current rate of Sh11,370.98, while diesel oil used to power heavy industrial equipment will rise from the current Sh4,082.74 per 1,000 litres to Sh4,285.65.