Consumer pain as cooking gas prices up to record high

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Cooking gas prices heated to an all-time high of Sh3,231.84 for the 13-kilogramme cylinder in March, defying State-backed efforts to lower the cost of the fuel, including scrapping of the eight percent value-added tax.

Fresh data from the Kenya National Bureau of Statistics (KNBS) shows the average prices of the commodity continued on an upward trend during the month after they rose 1.4 percent from the Sh3,187.10 recorded in February, which translated into a three percent year-on-year jump.

The new average dwarfs the high of Sh3,218 recorded in June 2022 when disruptions arising from the Russia-Ukraine conflict that was sparked earlier in February of the same year, started hitting global economies.

A spot check showed that some retail outlets were selling at highs of Sh3,330 on Monday while the re-filling cost in some went below the national average to as low as Sh3,090.

According to analysts, the surge in prices is an aftermath of the falling shilling’s value, which hit record lows at the start of the year when marketers were purchasing the cargo that is currently in the market.

“I believe this is a direct effect of the forex rates that were applicable between January and February when the cargo was booked and purchased to cover demand for quarter one,” observes Martin Chomba, chairman of the Petroleum Outlets Association of Kenya.

“LPG prices in international markets were also quite high due to demand in the winter period and the Russia situation where they are no longer supplying to some of their traditional markets. I foresee prices coming down in quarters two and three as we move into summer periods and the sustained strengthening of the shilling against the dollar.”

Last year, the National Treasury through the Finance Act of 2023 removed the eight percent VAT on LPG in a bid to lower prices, but the recent rise has seen the costs surpass the levels that prevailed before the relief was introduced.

Shortly after the bill was enacted, the cost of the commodity fell from an average of Sh3,069 in June 2023 to Sh2,787 in July, in the process handing consumers a major relief.

A Cabinet sitting would, thereafter, in October propose the scrapping of all taxes on LPG in a bid to make the clean fuel affordable to most homes, including low-income ones, in a bid to cut reliance on kerosene, charcoal, and firewood which have adverse effects on the habitat and health.

The relief was, however, short-lived as prices started to rally thereafter courtesy of the free fall of the Kenyan shilling against world majors bloating the cost of importing commodities such as cooking gas and fuel.

Contrastingly, the retail prices of LPG rose between September and November at a time when the global cost of propane — which, together with butane, is used to make cooking gas— fell by double-digits.

It fell from a high of $0.77 per gallon (about 2.6 kilogramme of gas) on September 14 to a low of $0.63 on November 16.

Recently, the State developed the LPG Growth Policy, which seeks to transition all households to the use of cooking gas through a requirement that all housing developments have provisions for LPG 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 Treasury in the policy document.

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

In February last year, President William Ruto broke ground for the delayed construction of a bulk LPG receiving terminal at the Dongo Kundu Special Economic Zone.

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

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