State to end subsidy pointing to further increase in fuel prices

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Motorists fuel at a TotalEnergies Petrol Station on Kimathi Street in Nairobi onĀ June 14, 2022.Ā  NMG PHOTO | DENNIS ONSONGO

Energy Secretary Monicah Juma has said that the government will discontinue the fuel subsidy programme pointing to costly petrol and a further increase in the cost of basic goods and services in the coming months.

Dr Juma said on Thursday that the spike in global prices of crude past the $100 per barrel has strained the fuel stabilisation fund due to the sharp rise in compensation to oil majors to keep pump prices low.

Kenya has spent Sh67 billion to stabilise pump prices in the current financial year and the amount is projected to hit Sh84 billion by end of this month.

ā€œIt is difficult to sustain it (subsidy) to the extent that we would have liked. So far we have spent Sh67 billion and this will rise to Sh84 billion by end of the current fiscal year,ā€ Dr Juma said.

The developlment just comes days after pump prices rose by Sh9 pushing the cost of diesel, super and kerosene to new highs.

A litre of super and diesel now costs Sh159.12 and Sh140 in Nairobi respectively while a litre of kerosene rose to Sh127.94.

Without the subsidy, prices would have been Sh184.68 and Sh188.19 per litre of super and diesel respectively while kerosene would be selling at Sh170.37 per litre.

Prices of crude in the global market have been on Ā sustained rally since start of the year in the wake of the Russia-Ukraine war that disrupted supplies.

The current fuel prices are pegged on the price of crude per barrel at $112.48 and further increase in the cost of commodity will see diesel and super prices hit record highs by end of the year.

The subsidy kitty that is supported by the Petroleum Development Levy has been depleted several times since last year due to sharp increase in compensation margins to oil marketers.

Depletion of the kitty has forced the government to allocate funds for the subsidy through supplementary budgets in the current financial year.

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