Kenya Pipeline Company asks for 36pc rise in fuel tariffs
The Kenya Pipeline Company has applied for a 36 per cent increase on tariffs charged for transporting and storing fuel, a pass-on cost that could see a further surge in pump prices.
The Kenya Pipeline Company (KPC) has applied for a 36 per cent increase on tariffs charged for transporting and storing fuel, a pass-on cost that could see a further surge in pump prices.
The latest application by KPC to the Energy and Petroleum Regulatory(Epra) shows that charges at the Nairobi depot would be increased from the current Sh2,074.5 per cubic metre of petroleum to Sh2,617.33 within the financial year 2022/23, and rise further to Sh2,799.98 in 2023/34, and Sh2,824.57 in 2024/25.
Oil marketing companies evacuating fuel from the Eldoret depot will incur the largest brunt of the planned tariffs raise, with the costs set to rise from the current Sh3,669.56 per cubic metre to Sh4,228.31 within the next three years. This would result in an increase in the storage and transportation costs by 36 per cent during the period, further adding pressure on the cost of fuel.
Already, levies and taxes make up about 40 per cent of the total cost of petrol, 37 per cent of diesel, and 36 per cent of the cost of kerosene contributing to the prevailing record high fuel prices.
Oil marketers currently pay Sh705 per cubic metre of fuel for transportation, storage, and handling. The companies pass on these costs to consumers.
The current tariffs have been in use since 2019 and are reviewed every three years. A fuel costs breakdown by Epra shows the storage and distribution costs are charged at Sh3.62 per litre of petrol, Sh3.23 on diesel, and Sh3.22 on kerosene in the August-September pricing cycle.
The charges cater for the costs KPC incurs for pumping the fuel through its pipeline, pipeline losses, the costs of evacuating the fuel from the pipeline to road tankers, depot losses, and the costs of delivering the fuel to petrol stations that are within 40 kilometres of Nairobi.
The firm also wants to use the additional billions of shillings it aims to raise from the tariff review to recover the costs it used to upgrade its pipeline network and holding facilities.
And, in an attempt to win approval for its tariff application, KPC has made various concessions to Epra, which in 2019 shot down its request to raise charges.
For example, the company has lowered the provision for its expenditure on the construction of the Mombasa-Nairobi pipeline from Sh25.16 billion to Sh23.96 billion to reduce the recoverable amount from taxpayers in the new tariffs. KPC contracted Lebanese firm Zakhem International Construction for the multi-phased construction of the modern 450-kilometre oil pipeline at Sh48 billion in July 2014.
The 20-inch diameter pipeline — which is already in use — has an installed rate of one million litres of fuel per hour and ensures “sustained, reliable and efficient transportation of petroleum products in the region and meet demand in the next 30 years”, according to KPC.
The company has also agreed to relieve taxpayers from shouldering the costs of court awards against it, allowing only for provision for legal fees amounting to Sh200 million per year.
KPC and Epra officials met last week to iron out sticky issues in the parastatal’s tariff application even as public scrutiny of the proposed tariffs began yesterday in Kisumu. Fuel prices have surged by nearly a third over the past year, pushing the cost of the commodity to historic highs.
A litre of petrol is currently retailing at Sh159.12, diesel at Sh140 per litre, and kerosene at Sh127.94. Epra said consumers would have been paying Sh214.03, Sh206.17, and Sh202.11 per litre respectively had the state not applied the subsidy.
The current prices are, however, 25 per cent and 29.8 per cent higher than petrol and diesel costs respectively last July r, according to data from the Kenya National Bureau of Statistics.
