Why Kenyans may continue paying for high fuel costs

NAIROBI, Kenya Sep 30 – There is no end in sight for high fuel costs in Kenya after it emerged Thursday that the Petroleum Development Levy fund (PDL) contributed by taxpayers to stabilize fuel prices in the country is almost depleted.

The National Treasury told a parliamentary committee that much of the fund was diverted to infrastructural projects by the Jubilee government.

Fuel prices shot up in Kenya mid this month by an average of Sh9 per litre, sparking outrage across the country amid the tough times occasioned by the COVID-19 economic meltdown.

Presenting submission to the National Assembly Finance committee to explain the increase, Principal Secretary for Treasury David Muia said that the government had diverted Sh18.1 billion aimed at stabilizing fuel prices in the country to fund road construction projects among others.

Muia elaborated that it was well within the law to channel the funds to other development programs and unfortunately once the money has been depleted the exchequer cannot re-allocate other funds to the levy kitty.

“From the structures, it is difficult to fund it from the exchequer and that’s why we look at the balance of the levy kitty, when we are requested to give subsidies. We are currently doing consultations to see whether there is a way given the restriction of the law, we can fund the kitty, given the circumstances we are in,” Muia noted.

The committee chaired by Homa Bay Woman Representative Gladys Wanga however, questioned the legal mechanisms that created an avenue for the funds to be diverted.

“You have told us that the only place we can find money to stabilize fuel prices is in the PDL fund. Already for roads have the road maintenance levy. Why would you use all the money for road maintenance levy fund and go even further to dip into the PDL fund meant for stabilization fund. When the funds are depleted and we need money for stabilization, you come to say that stabilization funds can only emanate from the levy kitty. I am feeling disturbed on this matter,” Wanga lamented.

The Vice Chair of the committee who is also Roysambu MP Waihenya Ndirangu callED out the National Treasury for mishandling the stabilization fund, leaving Kenyans hanging dry.

“The two laws the PS has cited they don’t grant him the authority to divert the PDL funds. This is a blatant mishandling of government resources even against the constitution. This is like a father lending money for food to his uncle to buy a piece of shamba, then you leave your children starving,” said Waihenya.

Since financial year 2018-2019 the kitty fund has collected Sh30 billion with the highest fund collected, being Sh25.9 billion which was achieved  following an increase in the contribution rate to Sh5:40 cents per litre, according to the Petroleum development levy order, 2020.

Out of the fund, National Treasury spent Sh8.6 billion in cushioning Kenyans against high fuel costs between April and August this year.

In the month of September however, the request by the Ministry of Petroleum and Mining requested for release of a Sh5 billion  subsidy by Treasury which declined leaving the common mwananchi to bear the brunt of the hiked fuel prices.

“Petroleum ministry made a request for stabilization but unfortunately the fund doesn’t have that money. Consequently, that request was not honored because the fund has 3.6 billion shillings only,” the PS said.

The petition presented by Matungulu MP is seeking for the reduction of tax percentages so as to reduce the steep increase of fuel prices.

Among the taxes Mule is pushing to reduce is the Value Added Tax (VAT) on fuel products to eight per cent, VAT on petroleum to four per cent, zero rated LPG, reduce excise duty to two per cent, cut the railway levy to 1.5 per cent, and import declaration to one per cent.

Already Treasury has ruled out calls to review taxes and levies with the aim of addressing the current spike on fuel prices insisting that the current situation has been exacerbated by external factors which include increased international fuel prices.

 “We don’t charge import duty tax, which acts as a subsidy. Also, some of these taxes are not new, we had the VAT tax since 2018,” he pointed out.

We urge the committee to give us one month to consult and come up with a last solution on stabilizing the fuel prices in such unique situation,” he continued.

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