This exemption is a much-needed exemption to support the achievement of universal access to electricity as outlined in the Kenya National Electrification Strategy, 2018.
The industry lauds the government for reinstating these tax exemptions.
The government has been seeking to reach 100 percent uptake of clean cooking by 2028, two years ahead of the expected time.
The Finance Bill, 2021 provides tax exemptions for specialised equipment for the development and generation of solar and wind energy, including photovoltaic modules, direct charge controllers, direct current inverters and deep cycle batteries that use or store solar power.
This exemption is a much-needed exemption to support the achievement of universal access to electricity as outlined in the Kenya National Electrification Strategy, 2018.
The industry lauds the government for reinstating these tax exemptions.
SOLAR ACCESS
However, the renewable energy industry has been seeking to extend the benefits of the tax exemptions to not only solar customers but also consumers of clean cook stoves, clean fuels and goods for direct and exclusive use in assembly, manufacture, and repair of clean cook stoves.
The government has been seeking to reach 100 percent uptake of clean cooking by 2028, two years ahead of the expected time.
The government through the Ministry of Energy has been making great efforts to push for the universal adoption of clean cooking solutions through projects such as the Kenya Off-grid Solar Access Programme (Kosap) that has been promoting these technologies in the underserved counties, where the uptake is low.
The launch of the Bio-Energy Strategy in 2020 was a commitment by the Ministry of Energy to support the sector meet its clean cooking targets by 2028 as it aims to accelerate transition to clean cooking technologies and fuels.
The clean cooking sector is lagging with 70 percent households in Kenya still using biomass (wood) 59 percent of this using open fires to cook. Only 30percent of Kenyans have access to and use clean cooking technologies, majority of whom are in the urban areas.
On the other hand, Kenya reports 21,560 deaths annually due to household air pollution resulting from use of outdated traditional cooking methods, affecting mostly women and children.
In 2020, the government re-introduced taxes (VAT and duty) on renewable energy products, including clean cooking products that were exempted since 2016.
IMPROVED STOVES
The Finance Act 2020 extended the full 16 percent VAT to previously exempt or partially exempt stoves and fuels, including manufactured improved cook stoves.
In addition, the clean cooking products, through the EAC Common External Tariff incur 25 percent import duty on imported biomass cook stoves, 10 percent on parts and 25 percent on Bioethanol Vapour (BEV) cook stoves.
According to a study by the Clean Cooking Association of Kenya, 2021, the reintroduction of VAT on clean cooking products has forced the investors, producers and manufacturers to increase product prices, transferring the added VAT tax to the end-user.
As prices increase for clean cooking solutions, households are likely to revert to the use of traditional biomass fuel, imposing health and environmental impacts.
The study further showed that the 16 percent VAT on cooking products may raise $450 million (Sh48bn) funds for the government through 2030, but will eventually generate nearly $900 million (Sh94bn) in negative socio-economic impacts including time lost collecting and preparing fuel for cooking instead of generating income; costs associated with abating climate emissions and treatment of respiratory diseases; not including job losses.
VAT EXEMPTIONS
Costs from health impacts alone due to reduced transitioning to cleaner cooking options are estimated at Sh35 billion.
About 93 percent of these costs are due to increased mortality, especially from two health conditions: acute lower respiratory infection and ischemic heart disease.
Under Kosap, subsidies would need to increase, limiting the number of stoves funded and compromising government targets.
The clean cooking sector has a major role to play in driving Kenya’s transition to a green future, enhancing local manufacturing under the Big Four agenda and delivering universal access to clean solutions, hence the need to reinstate the VAT exemptions that were removed in 2020 for clean cooking products.
Njugi is the CEO, Clean Cooking Association of Kenya
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