Govt to end diesel, kerosene subsidies as marketers’ pending bills hit Ksh.52B

The government has set a December deadline to end fuel subsidies on diesel and kerosene as pending bills to oil marketers top Ksh.52 billion.

In an interview with Citizen Digital, Energy and Petroleum Cabinet Secretary Davis Chirchir said the government will follow through on its commitment to end fuel subsidies entirely after removing the cushion on super petrol.

Nevertheless, CS Chirchir admitted that the phase out would be dependent on the evolution of current geopolitical challenges including the impact of a proposed price-cap on Russia oil by the US.

“The subsidy is not sustainable. It however depends on what happens. I think starting in January, we won’t hear of any other subsidies,” he said on Friday.

On his part, Energy and Petroleum Regulatory Authority (EPRA) Director General Daniel Kiptoo said the government could be forced to look at alternatives to the subsidies should current geopolitical challenges keep fuel prices unchanged or higher.

“We are observing the market quite closely because of the geopolitics. OPEC (Organisation of Oil Producing & Exporting Countries) cut production by two million barrels a day starting this month and there are also sanctions on Russian barrels coming in February,” he said.

“There is a commitment to remove the subsidy but ultimately, how we control prices is dependent on the geopolitical factors and the government is not in control. We will look into other interventions to cushion consumers even if the subsidy is withdrawn.”

Despite the pronouncement of the end of fuel subsidies in September, the government has continued subsidizing diesel and kerosene prices as global oil prices remain elevated.

In the current pricing cycle which runs to December 14, the government has subsidized kerosene to the tune of Ksh.17.68 per litre.

Meanwhile, the price of diesel is being cross-subsidized with that of Super Petrol, with the gasoline consumers footing the bill for the lower diesel prices.

Without the stay of the subsidy, diesel prices would sit higher than those of super petrol, a development which would be a first in Kenya.

The cost of imported diesel has stood higher than that of petrol, by about 26 percentage points in October as the demand for diesel ramps up especially in Europe, after the continent was cut off from Russian gas ahead of the winter season.

In committing to end the fuel subsidies, President Ruto insisted that the cushion measure had been a burden to the exchequer.

“On the fuel subsidy alone, the taxpayers have spent a whopping Ksh.144 billion, Ksh.60 billion in the last four months alone,” President Ruto said after his inauguration into office on September 13.