Monday, May 27, 2024

For every Sh. 211.64 you pay for litre of fuel, government is eating Sh. 79.32 in taxes

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The Kenya Kwanza government has largely attributed the high cost of fuel on “global issues”, in a strong suggestion that the fuel situation is out of its control.

However, a close scrutiny on the fuel costs and taxes reveals that the high fuel costs in Kenya are not the result of global challenges.

Instead, they are the result of high taxes and a gross mismanagement of the local currency.

According to a breakdown of the costs and taxes associated with fuel that was done by Bizna Kenya, Kenyans are paying Sh. 79.32 for every litre of super petrol they buy at the pump. A litre of super petrol is currently retailing at Sh. 211.64.

The breakdown further shows that fuel is landing in Kenya at a cost of Sh 115.93. Importers and dealers are pocketing margins of Sh. 12.39 while distribution costs and storage are taking Sh. 4.01. This brings these costs to a total of Sh.  132.33 per litre.

According to the Energy and Petroleum Regulatory Authority (EPRA), the August Murban crude oil price per barrel was at USD75.61.

A litre of fuel is currently subjected to a total of eight taxes and levies. Value Added Tax is the highest at a whopping Sh. 29.19 per litre, followed by Excise Duty at Sh. 21.95 per litre and Road Maintenance Levy at Sh. 18 per litre.

The Petroleum Development Levy that had been started by the government of former president Uhuru Kenyatta as a fuel stabilization fund is taking Sh. 5.40 per litre of fuel, even though current fuel prices are not being stablized using the fund.

For every Sh. 211.64 you pay for litre of fuel, government is eating Sh. 79.32 in taxes
A breakdown of fuel costs and taxes per litre of super petrol. PHOTO/ BIZNAKENYA.

In addition to this, a comparison with previous trends shows that global challenges have had nothing to do with high fuel prices. For instance, in March 2022, the international crude oil price per barrel stood at USD94.

Locally, fuel prices at the pump were at Sh. 134 per litre. Today, the same barrel is going at around USD95 and a litre of petrol is selling at Sh. 211.64.

Whereas the US dollar rate against the Kenya Shilling was more stable, it will be noted that the local currency has depreciated in break neck speed over the past one year of President William Ruto’s government.

According to the data from the Central Bank of Kenya, on September 14, a day after the inauguration of President Ruto, the Shilling was trading at 120 against the US dollar. Today, it is trading at historic lows of 147 against the US dollar.

Alarmingly, the Shilling had also lost significantly against regional currencies such as the Ugand and Tanzania currencies.

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