No cheaper gas despite halved tax as dealers sell at old prices

Cooking gas

Retailers are still selling cooking gas at high prices even after the government last week halved taxes on the product.

Photo credit: File | Nation Media Group

Retailers are still selling cooking gas at high prices even after the government last week halved taxes on the product.

The Finance Act 2022, which took effect on Friday last week, cut valued added tax (VAT) on liquefied petroleum gas (LPG) from 16 per cent to eight per cent to cushion households against high commodity prices.

The new law was signed by President Kenyatta last month.

The tax cut comes a year after Parliament reinstated 16 per cent VAT on cooking gas, which, together with the rally in crude prices, has seen the cost of the 13kg cylinder rise by Sh900 since June last year.

Retailers have, however, failed to reflect the tax cut in their prices. A spot check by the Nation in major outlets showed that dealers were still refilling the 6kg cylinder at between Sh1,500 and Sh1,700 and the 13kg cylinder at between Sh3,200 and Sh3,500. Total Energies Kenya was refilling the 6kg cylinder at Sh1,540 and the 13-kg gas cylinder at Sh3,330. Energy and Petroleum Regulatory Authority (Epra) Director-General Daniel Kiptoo said he expects the retailers to lower prices in the “next few weeks” to reflect the lower taxation.

Old stock

He attributed the delay to old stock priced under the previous taxation regime, adding that dealers could be looking to fix new prices when they bring in new stock.

Epra does not regulate cooking gas prices. This means its pricing is determined by the market forces of demand and supply, a fact that gives dealers leeway to price their products according to market dynamics.

The gains from the lower taxation could be wiped out should the global prices of crude continue rising in the coming weeks. Brent crude prices plunged to $108 per barrel on Friday last week, down from $114 the previous day over recession fears. They fell further to $103 on Wednesday, signalling volatility in the global oil market.

Mr Kiptoo said construction of a common user facility would help bring certainty in the cooking gas market by enabling the government to control the prices of LPG as it does those of petrol, diesel and kerosene.

The state-owned Kenya Pipeline Company (KPC) is set to build an LPG storage facility at the Kenya Petroleum Refineries Ltd in efforts to streamline importation of cooking gas.

Cooking gas is imported by private players who are free to set its prices. A common user facility would, however, enable LPG to be imported through the open tender system, where firms compete to import the cheapest LPG.


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