May fuel subsidy payments match taxes collected from petrol

The government parted with Ksh.21 billion in fuel subsidy payments to oil marketers in the month of May to nearly match taxes collected on the petroleum products in the period.

This mirrors fiscal pressures resulting from fuel price stabilization mechanism which the National Treasury hinted is now set to be vacated over its unsustainability.

“We collect in this country on taxes on fuel about Ksh.23 billion to Ksh.24 billion. Last month, we paid the oil industry Ksh.21 billion. This means you are pretty much getting your fuel tax free in Kenya,” stated Petroleum Principal Secretary Andrew Kamau on Thursday.

Last week, Energy Cabinet Secretary Monica Juma revealed the fuel subsidy had gobbled up Ksh.67 billion over 11 months to the end of May with a further Ksh.17 billion set to be dished out to oil marketers from the scheme this month.

The exchequer had earlier stated that the subsidy had become untenable and that it risked draining its entire allocation of Ksh.100 billion across the 2021/22 and 2022/23 fiscal years.

In the fuel pricing cycle running from May 15 to June 14, the government compensated Ksh.26.35 to oil marketers for every litre of super petrol sold, Ksh.43.94 for diesel and Ksh.50.32 for kerosene.

This is as an uptick in fuel prices pushed the cost of petrol, diesel and kerosene in the Capital Nairobi to Ksh.150.12, Ksh.131 and Ksh.118.94.

In the current pricing cycle to July 14, the government is set to pay oil marketers Ksh.25.56 for every litre of petrol sold, Ksh.48.19 for diesel and Ksh.42.43 for kerosene.

On June 14, fuel prices soared to a new record high with super petrol fetching Ksh.159.12 in Nairobi, diesel Ksh.140 and Ksh.127.94 for kerosene.

The fuel subsidy which has spared Kenyans from even higher fuel costs is now set to be dissolved exposing consumers to premium fuel prices over coming months should the high international fuel price persist.

For instance, without the subsidy today, petrol would cost Ksh.184.68 per litre in Nairobi, diesel Ksh.188.19 and kerosene Ksh.170.37.

While admitting the curtains have been closed on the fuel price stabilization mechanism, PS Kamau says Kenyans have nevertheless enjoyed some respite from controlled prices over the last two years.

“Something has to suffer. When you run a budget, when you have to do one thing, something else is going to suffer because you only have a fixed income,” he added.

“We as Kenyans have to recognize that we have reaped quite a big benefit in the last one year on the low prices experienced.”