Economy

Cooking gas prices up marginally despite value-added tax cut

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Gas cylinders on display at Nairobi’s Pipeline Estate on April 2, 2023. PHOTO | LUCY WANJIRU | NMG

The price of cooking gas increased by 1.7 percent over last year amid a rally in global prices and a weak shilling which negated the tax cut on the product.

A 13-kilogramme filled cylinder of liquefied petroleum gas (LPG) was refilling at an average of Sh3,032 in December last year, according to data from the Kenya National Bureau of Statistics (KNBS).

It is a marginal increase from an average refilling price of Sh2,980 in December 2022.

This means that cooking gas prices have returned to the level before the government removed taxes on the product.

The National Treasury, through the Finance Act, of 2023, removed the 16 per cent Value Added Tax (VAT) on LPG in a bid to lower prices.

Read: Relief as cooking gas prices drop on tax cuts

The cost of the commodity subsequently reduced from an average of Sh3,069 in June to Sh2,787 in July, handing a major boost to consumers.

The relief however did not last long, as prices started to rally thereafter, rising back to the levels seen before VAT was scrapped.

The Kenyan shilling was in a free fall against the US dollar last year, which made it more expensive to import commodities such as cooking gas and fuel.

This additional burden was added onto the final price of the product, eroding the gains that had been made by eliminating the tax.

Global prices of the commodity have further also remained volatile, rising sharply in recent months.

The government is keen on increasing the per capita consumption of LPG as part of efforts to grow the use of renewable energies.

The State recently developed the LPG Growth Policy which seeks to transition all households to the use of cooking gas.

The policy proposes that all housing developments have provisions for liquefied petroleum gas reticulation infrastructure.

“This provision will be embedded as a prerequisite for approval of any housing development projects, including those under the Affordable Housing Programme,” says the Treasury.

The policy further seeks to encompass establishing common-user LPG import terminals, distributing subsidised LPG cylinders to low-income households, and promoting LPG use in institutions.

President William Ruto in February 2023 broke ground for the construction of a bulk LPG receiving terminal at the Dongo Kundu Special Economic Zone (SEZ).

Read: LPG use up in first half defies high price

The facility is owned by Tanzanian firm Taifa Gas and is expected to have a storage capacity of 30,000 metric tonnes.

According to the Energy and Petroleum Regulatory Authority (Epra), there is still a need to build infrastructure to enhance competition and provide for economies of scale allowing for less costly imports of the commodity.

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