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EPRA says subdued production, govt levies main triggers for fuel price hikes

NAIROBI, Kenya Sep 28 – The Energy and Petroleum Regulatory Authority (EPRA) has attributed the hike of fuel prices in the country to increased landing cost and multiple levies charged under the existing legislative framework.

Speaking while presenting submissions to National Assembly Finance Committee regarding two petitions challenging the increase in the cost of fuel, EPRA Director General Daniel Kiptoo explained that the situation is not unique to the country.

“The pressure is high fuel prices is not only in Kenya but it is global. Post-COVID we have seen the market recalibrate quite fast we have not had an increase in production that has marched the wake up of the economy globally,” he stated.

Even with the increase in fuel prices globally, the EPRA pointed out that the status quo will remain as the framework for the cost formula used to determine prices is guided by a summation of levies, taxes and the actual supply chain.

Kiptoo elaborated that until policy makers which include the National Treasury and Parliament reconsider some of the taxes and levies that petroleum products are subjected to, Kenyans will continue to bear the burden.

“In our view we would recommend the policy makers to relook into some of the taxes and levies, that is what is within our purview. Again we are mere regulators not policy makers. Only the National Treasury and Parliament can alleviate Kenyans from the huge taxes and levies,” he noted.

The House Finance Committee tasked the regulator to explain why the fuel prices in the neighboring countries of Tanzania, Uganda and Rwanda are low compared to Kenya yet some of them are landlocked countries and depend on the Port of Mombasa to import fuel.

Ugandan suppliers for instance have to pay port levies before incurring transport charges by road or pipeline for more than 1,165 kilometers through the Malaba or Busia border.

The regulator argued that the margin was precipitated by huge taxes and levies that govern the price of petroleum products.

Kiptoo further said neighboring countries have executed subsidies which help to cushion consumers.

“We have indeed looked into the fuel prices in the neighboring countries. In Uganda for example they are selling Super Petrol at Sh 129.47 and they have no  fuel prices control. In Tanzania and Rwanda the fuel prices are low compared to Kenya as the two countries have applied fuel subsidies,” Kiptoo noted.

Kenya however removed fuel subsidies in September 2021 with the authority saying they had no role on subsidies.

“The mandate of collection and disbursement of petroleum taxes and levies is a preserve of the National Treasury with the exception of the Petroleum Regulatory Levy that funds the operations of EPRA,” said Kiptoo.

The authority explained to the committee that the oil market is quite unpredictable and extremely prone to sudden shocks depending on the global market.

EPRA officials said the agency had worked in collaboration with the Ministry of Petroleum and Mining in developing Petroleum (Petroleum Consolidated Fund), Regulations 2021 and Petroleum (Strategic Stocks ), Regulations 2021   meant to ensure strategic stocks in the country should shortage of fuel occur globally.

“Petroleum strategic stocks can help cushion the country from the shocks of escalating and deescalating prices in the international markets,” he said.

The committee was guided  to inquire on how demurrage charges, fees levied by shipping lines to the importer, affect the pricing of petroleum, how much they are per month and in which component of the fuel pricing they are contained.

House Speaker Justin Muturi directed that the committee  to  attach a draft bill to the report proposing legislative interventions to reverse the situation.

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