Pump prices to sky-rocket on plan to raise fuel levy to Sh25

Photo credit: File | Nation Media Group

Motorists will dig deeper into their pockets to fuel their vehicles if MPs approve a proposal to increase the Fuel Levy charge from the current Sh18 to Sh25 per litre.

Transport Cabinet Secretary Kipchumba Murkomen wants the Finance and National Planning Committee to increase the fuel levy charge by Sh7 per litre. It was last reviewed in July 2016.

Mr Murkomen said the expected revenue from the increase of fuel levy by Sh7 per litre will amount to Sh115 billion.

The government currently collects Sh83 billion from the fuel levy. The government targets to collect an additional Sh32 billion if the fuel levy is increased from Sh18 to Sh25 per litre.

Mr Murkomen said the financing gap for road maintenance over the five years (2023 to 2027) is Sh315 billion against the projected Road Maintenance Levy Fund (RMLF) collections.

He said this will likely increase the maintenance backlog over that period which stood at Sh727 billion as of 2022.

Mr Murkomen said an increase in fuel levy will generate enough resources for the construction and repair of roads across the country.

“It is concluded that increasing the fuel levy charge from Sh18 per litre to Sh25 per litre yields a revenue outcome which is consistent with halting the increase in the maintenance backlog,” Mr Murkomen said.

“When the current fuel levy rate of Sh18 per litre was established in 2016, the pump price of petrol in Nairobi was Sh95. As at May 2024, pump price is Sh194 while fuel levy remains at Sh18 per litre. This difference illustrates the loss of purchasing power of the fuel levy over time due to inflation.”

Mr Murkomen told the committee chaired by Molo MP that currently, the Road Maintenance Levy Fund receives collections from the Fuel Levy and Transit Tolls. The Road Maintenance Levy Fund is managed by the Kenya Roads Board (KRB).

Mr Murkomen is seeking to increase the Fuel Levy through the Finance Bill, 2024. He appeared before the committee to provide final submissions on the Bill.

“As mentioned earlier in this brief, the quantum of fuel levy per litre was last amended in 2016. It is proposed that consideration now be given to reviewing the current quantum of the fuel levy,” Mr Murkomen said.

He told MPs that there are emerging challenges in road maintenance including a gap between maintenance needs and the available resources, which affects the road network of all three agencies.

He said there is an absence of a mechanism to guarantee the portion of the funds allocated annually to rural roads under the Kenya Rural Roads Authority (Kerra) is used to maintain paved rural roads.

“The effect of the above gap between needs and resources is that excessively delayed maintenance is now adversely impacting road conditions, a pattern that is projected to accelerate unless resolved,” Mr Murkomen said.

“In 2016 when the fuel levy charge was last adjusted, the length of paved roads nationally was 16,600 kilometers. By 2024, the length of paved roads has increased to 25,411 kilometers.”

He said the cost of maintenance of paved roads is significantly higher than for the same roads prior to being paved.

Road maintenance gap

Mr Murkomen said the road maintenance gap is anticipated to increase further in the near term due to the existing road maintenance backlog that continues to increase due to deterioration on account of neglected maintenance.

Baringo North MP Joseph Makilap demanded to know the net effect of increasing the fuel levy by Sh7 on the cost of goods.

Kigumo MP Joseph Munyoro asked the Ministry to consider a percentage of fuel levy instead of increasing the amount by Sh7 per litre.

“We have a motor vehicle tax of 2.5 percent. We have eco levy on batteries. You now want to increase the fuel levy Sh7. How are all these levies going to affect the cost of transportation?” David Mboni, the MP for Kitui Rural said.