The move would greatly add poor households who are the main users of this fuel.
Kerosene was always a sensitive and often political product requiring cautious handling because it is the source of cooking and lighting energy for many low income households.
That is why the proponents of increasing taxes on kerosene should diligently ponder the implications. The justification advanced is to combat adulteration of petrol and diesel with kerosene
There is however a compelling health justification to ultimately ban indoor use of kerosene whose emissions are harmful to the users.
However, such a health-driven ban should coincide with the provision of sufficient and affordable alternative clean energy for all households, such as liquid petroleum gas(LPG), electricity and solar lamps.
The push to increase kerosene taxes is mainly by the oil firms who are concerned with the runaway adulteration problem, and its adverse consumer impacts. Adulteration also reduces KRA revenues from petroleum.
Some historical background on kerosene taxation is useful. After the 1979 Iranian crisis, high global oil prices created an economic crisis in Kenya.
Balance of payment was upset with oil import bill approaching 30 per cent. Inflation shot up, and by 1981 economic recession in Kenya was confirmed.
During the June 1980 annual budget the Treasury implemented corrective socio-economic policies which included differentiation of petrol, diesel, and kerosene taxes which were hitherto equal.
I recall the details because as a senior manager in the oil industry, the Treasury invited me to comment on their proposed fiscal actions.
The “poor” kerosene consumer was to be shielded from oil price volatility with reduced taxes; the crucial agricultural sector was also to enjoy lower diesel taxes; while petrol was to be loaded with high taxes to spur fuel efficiency and conservation. Petrol use was considered to be mostly discretionary.
These fiscal policy drivers have remained unchanged and are still mostly relevant. The many vulnerable low income households are still dependent on kerosene and require protection from oil price volatility.
The unintended consequence of low kerosene taxes was the emergence of petrol and diesel tax dilution with kerosene. That is why the government introduced laws, regulations, and institutional capacity to combat fuel adulteration.
The current ineffectiveness of enforcement systems to curb adulteration should be the prime conversation at hand. Raising kerosene taxes is an escapist shortcut to cover for enforcement shortcomings.
I suggest that the oil companies together with the energy regulators fly to Ghana, and by the time they come back they will have a “cut and paste’ solution for adulteration.
Technology has been effectively used in Ghana to reduce the vice to near zero. This way, we shall spare the poor households the unnecessary burden of increased kerosene taxes.
The health agenda should not be mixed up with the adulteration challenge. We need to plan for an ultimate ban on use of kerosene to curb the heath impacts from indoor emissions.
But before we achieve this policy objective, all households in Kenya, rich and poor, should have sufficient access to affordable clean energy for both cooking and lighting.
Again, ready solutions are available in Ghana where kerosene use has been significantly reduced with increased LPG market penetration, and a high uptake of solar lamps.
Finally, we need to note the ongoing efforts by the government to improve LPG availability and affordability across Kenya.
Kenya Pipeline Company (KPC) has lined up projects to step up common user LPG primary imports and distribution capacity across Kenya. This will increase access to cheaper gas to as many LPG enterprises and consumers.
Further, the National Oil Company has a project to procure thousands of affordable six-kilo cylinders to increase consumer access to LPG.
There is also an ongoing study on how best to roll out a massive and effective LPG distribution system across the country.
When these LPG projects are implemented; and the last mile electricity program sufficiently expanded; and solar lamps are widely marketed, then it will be time to phase out domestic kerosene, firstly by increasing taxes and finally by imposing a total ban.
In the meantime oil firms and regulators have a legal obligation to guarantee quality of motor fuels put in the market.
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Note: The results are not exact but very close to the actual.
