More pain at the pump looms if new levy gets nod

Fuel pump

A fuel attendant holding a fuel pump at the filling station along Kimathi Street.  Small player in the oil market have backed the state to state oil import deal.

Photo credit:  Jeff Angote | Nation Media Group

What you need to know:

  • The tax, commonly referred to as road maintenance levy fund (RMLF) is collected at the fuel pump and is currently set at Sh18 per litre of petrol and diesel.
  • The State maintains the country’s roads network through the Kenya Roads Board Fund (KRBF), which is mainly financed through the proceeds of the RMLF as well as transit tolls.

Kenyans should brace themselves for even higher fuel prices in the coming days if a new proposal to increase road maintenance tax is approved.

The Kenya Roads Board (KRB) is seeking to increase the road maintenance levy by Sh5 to cater for inflation in the cost of road construction materials.

The tax, commonly referred to as road maintenance levy fund (RMLF) is collected at the fuel pump and is currently set at Sh18 per litre of petrol and diesel, with Sh3 allocated to the annuity fund and the balance to road maintenance, rehabilitation and development.

This means that motorists would pay Sh23 per litre of fuel at the pump if the proposal is approved, raising the overall cost of the commodity.

“Recommend and lobby for a review of RMLF rate... Increase of RMLF rate by Sh5,” KRB said in its work plan for the period 2023-2027, arguing that even though the price of petrol and diesel has been rising since 2020, the amount charged as fuel levy remained constant at Sh18 per litre despite the increased demand for better roads. 

The KRB is proposing that the changes take force in 2025. 

The State maintains the country’s roads network through the Kenya Roads Board Fund (KRBF), which is mainly financed through the proceeds of the RMLF as well as transit tolls.

The KRBF is shared by the road agencies charged with maintenance — Kenya National Highways Authority (Kenha), Kenya Urban Roads Authority (Kura), Kenya Rural Roads Authority (Kerra), Kenya Wildlife Services (KWS), and the county governments.

In the five years from 2018–2022, KRB spent Sh309.74 billion on road maintenance, rehabilitation, and development programmes, excluding the Road Annuity Fund.

These amounts consisted of Sh128.37 billion to Kenha, Kerra (84.95 billion), Kura (Sh35.24 billion), KWS (Sh31.36 billion), county governments (Sh26.69 billion) and a Sh31.36 billion allocation through the Transport Cabinet Secretary.

KRB said the cost of maintaining roads has shot up substantially from costlier fuel prices to the cost of key road construction materials, including tar and bitumen, and is expected to impact the cost of periodic road maintenance by road agencies in the 2023/24 fiscal year which commenced on July 1.

For example, the cost of periodic maintenance per kilometre by Kenha is expected to move from Sh3.94 million to Sh6.06 million in the current financial year, according to data from KRB.

“There has been an increase in periodic maintenance cost by about 35 per cent attributable to the uptake of roads with failed payments and increase in price construction materials mainly due to rise in fuel prices,” KRB noted in a summary of its 2023/24 annual public roads programme.

Kenha is expected to spend an estimated Sh1 billion on the periodic maintenance of 166 kilometres of paved road surfaces. Routine maintenance and spot improvement by the agency will, meanwhile, cost three times as much or Sh3.1 billion and will touch on 717.3 kilometres of roads.

The bulk of Kenha’s road maintenance budget at Sh14.4 billion will be handled under performance-based contracting where most risks are transferred to the contractor. KRB has allocated Kenha Sh33.6 billion in the current financial year for road works.

On its part, Kerra has been allocated Sh25.6 billion for road works, including Sh18.7 billion for routine maintenance and spot improvement. The road maintenance budget by Kerra is slightly higher than the Sh17.9 billion set aside for the same works last year.

Meanwhile, Kura has been apportioned a budget of Sh12 billion from which it will deploy Sh8.7 billion for road maintenance intervention measures on some planned 2,821 kilometres of roads. The intervention measures are expected to include the construction of pedestrian walkways.

The KWS has been allocated Sh802.7 million for road works, which include the routine maintenance of 2,554.8 kilometres of roads for Sh621.5 million.

KRB said it targets to raise Sh150 billion through the capital markets and other creditors to finance road maintenance programmes amid threats of lower RMLF collections as more users shift to electric vehicles.

“With the accelerated transition to e-mobility, the effect of global climatic change, and gradual transition from the traditional use of fossil fuels to green energy, the Board expects a future reduction in fuel levy collections,” KRB said.

“The Board is currently conducting a study on the economic impact of electric mobility on sustainability of the Road Maintenance Levy Fund which shall inform the Board on the sustainability of continued dependability of fuel levy as the only major source of financing road maintenance, rehabilitation and development and recommend on other sustainable financing options based on the changing operational environment,” it added.

A strong shift toward e-mobility could have an impact on the RMLF collections and hurt operations in the road sector which has an estimated funding gap of Sh610.7 billion for rehabilitation of the country’s dilapidated network between 2023 and 2027.

Uptake of electric vehicles (EVs) in the country has been on a steady rise since last year as Public Service Vehicle (PSV) operators and those in the digital-taxi-hailing and boda boda drop the fossil-fuel powered engines in favour of the electric units.

Kenya had 1,350 electric vehicles (two-wheelers and three-wheelers) as of February this year and the number is expected to rise by the end of the year.

Local electric mobility start-up BasiGo and Swedish-Kenyan technology company Roam have since last year deployed at least 20 electric buses on city routes as the shift to clean mobility by PSVs gathers pace. The two firms say that orders for the units have been increasing.