High LPG prices usher in charcoal

For close to three months now, a stock-up of charcoal by poor households in many urban areas of Kenya has been witnessed.

Velma Juma, a resident of Chokaa — a low-income settlement in Nairobi’s Eastlands area, is among those caught in this wave of charcoal stock-up that is sweeping across thousands of households in the country.

In 2017, she ditched her charcoal-burning stove (jiko) after her husband bought a liquefied petroleum gas (LPG) burner and cylinder.

For about four years until August this year, Ms Juma had mostly relied on this clean energy for cooking—having switched from charcoal use except for a "few meals which take long to cook".

A sharp rise in LPG prices has, however, thrown her back to using the cheaper charcoal despite the inconveniences of its dirty nature.

“With charcoal, it takes time, but at least it’s not expensive. However, I have to use it outdoors, especially in the evening, to avoid the risk of carbon monoxide poisoning” she told Smart Business in an interview.

The mother of two says it now costs Sh1,200 to refill her six kilogramme gas cylinder, up from an average Sh750-800 earlier in the year. The surge in LPG prices is largely attributed to reintroduction of the 16 per cent value-added tax (VAT) in July, coinciding with a rise in global prices of butane and propane — bye-products of crude oil used in making cooking gas.

Basic commodities

The latest assessment of prices of basic commodities by the Kenya National Bureau of Statistics (KNBS) shows that the cost of LPG posted a 24.5 per cent jump in October compared to a similar period last year—the highest increase among the prices of goods in a consumer basket that is used to track inflation.

LPG suppliers have passed on the additional cost to end-users keeping with a common phenomenon in all sectors where investors are keen to protect their bottom lines.

Ms Juma’s story captures the plight of the majority of low-income urban households, which are increasingly turning to alternative fuels at a time their purchasing power has been eroded further because of Covid-19 shocks on earnings.

“People have different stoves for cooking and indications we are getting is that people, especially in low-income areas, are shifting their primary source (of cooking fuel) more to charcoal than LPG,” Ms David Njugi, chief executive of Clean Cooking Association of Kenya, told the Smart Business.

“They are only using LPG to cook very light things such as eggs and not main meals.” The shift to charcoal, however, comes with more pain for households as prices of the commodity also continue to rise on increasing demand.

Searing demand for charcoal has exerted pressure on prices with the cost of a two-kilogramme tin, popularly used when selling this fuel type in estates, rising by as much as 25 per cent.

In Nairobi’s Kawangware 56 area, traders said charcoal prices have risen since July with a 90-kilogramme bag now retailing for as much as Sh3,600, up from Sh3,200 earlier.

A two-kilogramme tin is now selling for Sh90 on average from Sh70 a few months ago.

The high cost of LPG has turned the spotlight on the government at a time the world is desperate to boost uptake of clean energy and reduce use of dirty charcoal and kerosene.

Kenyan households had since June 2016 been enjoying low cooking gas prices after the Treasury scrapped tax on LPG to cut costs and boost uptake among the poor.

This saw annual consumption of LPG more than double to 326,000 tonnes in 2020 from 151,000 tonnes in 2016, according to estimates by the KNBS. When LPG was exempted from VAT in 2016, the government initiated a programme to distribute six-kilogramme LPG cylinders to low-income homes at a subsidised cost. Mwananchi Gas Project launched in October 2016, under the state-owned National Oil Corporation of Kenya (Nock), had initially targeted over four million poor households with a pilot in Machakos and Kajiado counties.

Distribution challenges

The homes were to be supplied with the gadgets at a discounted price of Sh2,000 in three years, with refills costing Sh840.

Nock, however, suspended the project in June 2018, citing distribution challenges with the State audit office establishing that some Sh870 million had been spent with no value to taxpayers.

The project was suspended a month after the Treasury had allocated Sh2 billion towards the purchase of the cylinders, dubbed Gas Yetu, in the financial year starting July 2018, following the initial Sh1 billion budget a year earlier.

Treasury Cabinet Secretary Ukur Yatani in his draft Budget Policy Statement (BPS) for the fiscal year 2022/2023 indicated that State plans to revive the subsidy scheme from July 2022.

According to the blueprint, the Treasury now expects to fund the supply of at least 300,000 cylinders, which is, however, only a small percentage of the target of four million that was outlined in the initial plan.

“Over the next three fiscal years, the government will strengthen enforcement and operationalisation 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 kg LPG cylinders to low-income households,” the Treasury said.

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