Road maintenance levy: Why fuel prices would have been Ksh.7 cheaper

The Energy and Petroleum Regulatory Authority (EPRA) hiked the levy from Ksh.18 per litre to Ksh.25 per litre in the latest review at a time when the country is grappling with the high cost of living. 

Former Transport CS Kipchumba Murkomen gazetted the levy on July 10, 2024, a day after he assured Kenyans that the overwhelming concerns from Kenyans during the public participation stage would be considered. 

"Kenyans have told us that, yes, you need money but make sure you do not raise fuel (prices) at the pump. We shall think how to do this because we are paid to think," Murkomen said on July 8, 2024. 

"We will explore ways of getting the resources needed to maintain roads, as expressed by Kenyans in their numbers without raising the cost of living through an increase in petroleum prices."

The gazette notice dated July 10, 2024, surfaced online five days later. Questions arose as to whether the document is valid and why the government waited a day after EPRA reviewed the fuel prices to release the gazette notice

He explained that the intended fuel levy was the government's plan to raise the maintenance deficit of Ksh.78 billion for the financial year 2024/2025. According to Murkomen, the figure is expected to rise to Ksh.315 billion by FY 2028/2029. 

A day before he was fired, former CS Murkomen gazetted the increase of the levy by Ksh.7 per litre, the first time the levy was hiked since 2016. 

Despite the increment, pump prices dropped by Ksh.1 for petrol, Ksh.1.50 for diesel and Ksh.1.30 for kerosene. This means that consumers in Nairobi will pay Ksh.188.84 per litre for petrol, Ksh.171.60 for diesel and Ksh.161.75 for kerosene. How can this be? 

A look at the landed cost of super petrol in the latest EPRA review shows that the price of Super petrol when it docked at the Mombasa port was Ksh.92.97. This is Ksh.7.33 less than the previous landed cost in the month of June. 

Landed costs factor in the global prices which this time reduced by a big margin. This means that the price drop should have trickled down to the consumer, hence the cost of petrol should be Ksh.7 cheaper. 

However, the government increased the fuel levy by Ksh.7 which lowered the price drop that should have been passed to the consumer. 

With the fuel levy increase, the taxes that a consumer pays at the pump have increased from Ksh.76.20 in the month of June to Ksh.82.74 in the July-August cycle. 

The levies and taxes of super petrol are 88.9 per cent of the landed cost; this has been the highest in the history of price reviews. In the June-July cycle, the tax on super petrol was 76 per cent of the landed cost

The current price of super petrol Ksh.188.84 is more than double the price of the commodity by the time it lands at the port of Mombasa, largely because of the taxes and levies. 

A breakdown of these taxes is as follows: Excise Duty tax (Ksh.21), Road Maintenance Levy (Ksh.25.00), Import Declaration levy (Ksh26.05), Petroleum Development levy (Ksh.5.40), Petroleum Regulatory levy (Ksh.0.75), Railway Development levy (Ksh.1.33) and Value Added Tax (Ksh.26.05). 

Motorists Association of Kenya (MAK) opposed the move to hike the levy, terming it illegal as it did not undergo public participation or parliamentary legislation. They questioned why the government would hike the levy despite strong rejection from the public. 

"MAK is opposed to the mid-July to August fuel prices where the Road Maintenance and  Fuel Levy has been escalated from Ksh.18 per litre to Ksh.25 per litre despite submitted objections from the stakeholders and the general public," the statement read in part. 

The association noted that fuel prices would significantly rise if the landed cost increased. 

"Fuel pump prices should be Ksh.7 cheaper now something the EPRA has failed to do," the association added.