Gov't makes u-turn, reinstates fuel subsidy

The government has backtracked on its earlier decision to remove the fuel subsidy, just three months after doing away with it.

The return of the subsidy was revealed in this month’s fuel price review by the Energy, Petroleum and Regulatory Authority (EPRA) which indicated a compensation component for the oil marketing companies.

“We will not go back to reckless borrowing. We will not go back to subsidies that benefit brokers, cartels and people who are politically correct. We will not go back there…,” President Ruto said months ago.

EPRA says oil marketing companies will be compensated from the petroleum development fund, thereby retaining the pump prices at Ksh194.68 for petrol, Ksh179.67 for diesel and Ksh169.48 for kerosene.

According to EPRA, without its intervention, the prices of petrol would have risen to Ksh.202.01 a litre, diesel to Ksh.183.26 a litre and kerosene would have increased to Ksh.175.22 a litre in Nairobi.

This means that the government will subsidise petrol by Ksh.7.33, diesel by Ksh.3.59 and kerosene by Ksh.5.74 .

Early last month EPRA effected an eight per cent increase in value-added tax on fuel through the Finance Act 2023, pushing up the price of petrol by Ksh.13.49, that of diesel by Ksh.12.39 and kerosene by Ksh.11.96 per litre.

Previously, oil marketing companies received over Ksh.124 billion in subsidy from April 2021 to when it was scraped in September 2022. The landing cost of a litre of super petrol according to latest numbers from EPRA is Ksh.107.99 with taxes tacked on to the product accounting for Ksh.76.65.