ERC hits the poor with Sh5 kerosene tax

Taxes on kerosene will be reinstated from Saturday midnight, hitting the poor who use the fuel widely to light their homes and power cooking stoves.

The Energy Regulatory Commission (ERC) Thursday said it will include a Sh5.75 a litre tax during its monthly review after President Uhuru Kenyatta assented to the Excise Duty Bill—which increased levies on items like water, beer, cigarettes, juices and used cars.

The increase falls short of demands by the Petroleum Institute of East Africa (PIEA) — the oil dealers lobby —to remove Kerosene subsidy because it was being mixed with more expensive petrol and diesel and sold to motorists.

“We are going to include the excise duty in our Saturday review,” the ERC director-general Joseph Ng’ang’a told the Business Daily.

The PIEA reckons that rising diesel and petrol prices have led to increase in contamination of the two products by the cheaper kerosene.

The institute has in the past two years lobbied the Treasury to reinstate taxes on kerosene after they were removed to cushion poor households.

Petrol currently retails at Sh93.29 per litre in Nairobi while diesel and kerosene sell at Sh82.43 and Sh56.04 respectively.

This is mainly due to the different taxes the commodities attract given that petrol has an excise duty of Sh19.89 a litre while the levy on diesel stands at Sh8.24. 

Diesel and petrol also attract a road levy charge of Sh9 a litre that is not applied on kerosene.

This has seen some unscrupulous traders mix kerosene with diesel and petrol to enjoy higher margins in a market where the price of fuel products is controlled by the ERC.

The government started carrying out a monthly review of retail fuel prices in 2010 after they shot upwards, raising the cost of living.

But the Sh5.75 kerosene tax will not be enough to bridge the gap between the commodity and diesel and petrol.

SOURCE: BUSINESS DAILY