Editorials

Find sustainable solution for fuel pricing

Fuel1403

An attendant at a fuel station in Nairobi. FILE PHOTO | NMG

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Summary

  • Thursday’ decision to cut fuel prices through a subsidy is a welcome move.
  • But the State should now find a sustainable solution that can save consumers from the unstable prices.
  • The State has been sending mixed signals with the Treasury saying it had exhausted money meant to cushion consumers from price hikes, pointing to the need to find a lasting solution.

Thursday’ decision to cut fuel prices through a subsidy is a welcome move. But the State should now find a sustainable solution that can save consumers from the unstable prices.

The State has been sending mixed signals with the Treasury saying it had exhausted money meant to cushion consumers from price hikes, pointing to the need to find a lasting solution.

Parliament should consider adopting proposals to exempt fuel from annual review of inflation tax and the cutting of some of the levies imposed on petrol and diesel.

The State should also ensure the Sh5.40 per litre levy that motorists pay for the subsidy is not diverted for other uses.

Crude oil prices are currently on a rise with no indication when this will stop meaning that the State may be forced into months of subsidy if the country is to keep fuel prices relatively down.

This could mean making painful decisions such as diverting money meant for development and other equally completing needs to compensate oil marketers—a move that looks unsustainable.

Increased fuel prices usually carry knock-on effects on the economy including higher transport and manufacturing costs which in turn worsen inflationary pressures.

The State must therefore be willing for forego some taxes on fuel and hope that such a move can lower costs for businesses and trigger growth from which more taxes will be collected.