Higher fuel adulteration levy plan to fund LPG goal

Cooking gas on display in Nairobi's Pipeline Estate on August 20, 2023.  

Photo credit: File | Dennis Onsongo | Nation Media Group

The government is considering a shift to a floating charge on the fuel anti-adulteration levy to maximise collections to fund the supply of free cooking gas cylinders to poor households.

The levy was introduced through the Finance Act of 2018 following an amendment to the Miscellaneous Fees and Levies Act of 2016 at Sh18 for every litre of illuminating kerosene imported.

The move was aimed at protecting motorists from rogue fuel dealers who were taking advantage of the huge gap in the price of diesel and kerosene to adulterate diesel.

The difference in prices was primarily caused by the fact that kerosene was excluded from the road maintenance levy, which is charged at Sh18 for each litre of petrol and diesel.

“We want to distribute 4.4 million gas cylinders to poor households within the next two years to promote clean cooking,” Energy and Petroleum Cabinet Secretary Davis Chirchir told journalists at the weekend.

“One of the ways we are looking to fund this is changing the anti-adulteration levy from a fixed charge to a floating charge. This will discourage the use of kerosene and enable more households to adopt the use of cooking gas,” said the CS.

Changing the levy into a floating charge such as a percentage will enable the government to collect higher amounts whenever prices go up. This will, however, make kerosene costlier for consumers.

The Treasury projects it will collect Sh4.2 billion from the anti-adulteration levy in this financial year, an increase from the Sh3.8 billion expected to have been collected in 2022/23. 

The energy regulator on Saturday increased the price of kerosene by Sh2.45 per litre, pushing the cost of the product to a historic high of Sh205.06 per litre in Nairobi.

The higher price of kerosene is likely to dampen consumption, hitting the State’s revenue targets.

The Cabinet last week approved the Liquefied Petroleum Gas (LPG) Growth Policy which seeks to progressively wean off the 70 percent of Kenyan households using biomass, kerosene, and other dirty fuels as their primary cooking fuel.

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