Fuel pump

Fuel attendant holding a fuel pump at the filling station along Kimathi Street in this photo taken on June 8, 2021.

| File | Nation Media Group

MPs in extra Sh5bn plan to stabilise prices of fuel

What you need to know:

  • Allocation to supplement collections made through the petroleum development levy.
  • For about 10 months now, the State has intervened on consumer prices of fuel to defuse public outrage.

Members of Parliament (MPs) have recommended an extra Sh5 billion allocation by the Treasury to cushion consumers from high fuel prices in the new financial year.

The Budgets and Appropriations Committee of the National Assembly said the funding would help stabilise petroleum prices amid volatility in global prices.

 “The Department (Petroleum) will receive an additional Sh5 billion in the 2022 BPS (Budget Policy Statement) that will cater for oil market price stabilisation,” the committee said in a recommendation on the 2022/2023 BPS.

The allocation will supplement collections through the Petroleum Development Levy (PDL) that is charged at Sh5.40 on each litre of petrol and diesel sold at the pump.

For about 10 months now, the State has intervened on consumer prices of fuel to defuse public outrage over expensive supplies.

The committee, however, recommends the restructuring of the subsidy scheme to ensure efficiency in the management of the funds.

Global oil prices

“The implementation of the fuel subsidy is hampered by a lack of the board to administer the Petroleum Development Levy Fund and the uncertainty of the fund as a fuel stabilisation measure in the long-term,” the committee said in its report and urged a review of the Petroleum Development Fund Act, 1991 to set up a board that would ensure the money is well managed before the end of the new financial year.

“The ministry should review the Act to provide for a board to administer the funds and ring-fence the allocations/appropriations for use in fuel stabilisation by the end of FY2022/23,” the committee said.

This comes as MPs questioned the effectiveness and sustainability of this scheme after it emerged that its levy raked in Sh55 billion from motorists last year.

Self-funding price stabilisation schemes are deployed to keep in check upward or downward swings in global oil prices. The stabilisation funds traditionally go into surplus when global oil prices are low and reimburse consumers whenever the prices go up.

In Kenya, there has been confusion over the current fuel subsidy scheme because the country already had in place a mid-month pricing formula that worked well to track global oil prices and set consumer costs appropriately.