Fuel prices are likely to rise if parliament approves a proposal by the government to raise the fuel levy from KSh. 18 to KSh. 25, in the first proposed review since 2016.
Cabinet Secretary for Transport, Kipchumba Murkomen, told the Finance and National Planning Committee that the additional levy will be necessary to ramp up efforts in road maintenance across the country. Murkomen said that the 39% increase will enable the government to collect about KSh. 115 billion as opposed to the current KSh. 83 billion that the government currently collects. The Transport CS also said that if the levy increment is not approved, the country may have to bear with delays in maintenance of roads. “It is concluded that increasing the fuel levy charge from KSh.18 per litre to KSh. 25 per litre yields a revenue outcome which is consistent with halting the increase in the maintenance backlog,” said Murkomen.
The road maintenance backlog as of 2022 stood at about KSh. 727 billion. Murkomen says that due to inflation, the purchasing power of the KSh. 18 has drastically reduced and an addition has to be made in alignment with the rising cost of construction and maintenance resources.
“As of May 2024, pump price is KSh. 194 while fuel levy remains at KSh. 18 per litre. This difference illustrates the loss of purchasing power of the fuel levy over time due to inflation,” Murkomen said.
Murkomen wants the parliamentary committee led by Molo MP Kuria Kimani to hike the fuel levy charge in the Finance Bill 2024.
Despite Murkomen’s allusion to the April-May floods destroying various roads across the country, the increased fuel levy will be a monumental pain for consumers. Combined with the VAT hike in the Finance Act 2023, this is likely to push fuel prices beyond the KSh. 200 mark, affecting the prices of essential foodstuff and services, with many ripple effects on the economy.
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