Motorists to pay for omitted rail levy in August fuel review
A filling station attendant refuels a car: The ERC will compensate oil marketers for the rail tax excluded in this month’s review. FILE
Oil marketers will next month be compensated for the rail development levy that was excluded from this month’s fuel price review in what will see consumers pay nearly Sh3 more per litre.
The Energy Regulatory Commission omitted the 1.5 per cent Railway Development Levy when reviewing the domestic prices, prompting uproar from oil dealers who are expected to pay the new tax from July 1.
The levy will help finance upgrade of the rail network and the State could collect about Sh22 billion with the oil imports making the biggest contribution at about Sh350 million monthly.
“It was an oversight on the part of ERC. We (KRA), the Energy ministry and other senior government offices are currently in discussions on how to address this matter,” John Njiraini, KRA Commissioner General said on Wednesday.
On Wednesday, the ERC said the amount of the new tax will be passed on to consumers in the next price review, meaning that consumers will pay for the two months at once.
“We will compensate the marketers in the next review for the tax already paid KRA that was not captured in this month’s review,” said Mr Kaburu Mwirichia, the ERC director general.
The inclusion of the new levy is expected to boost the cash flow and earnings of the oil dealers who are racing to cut losses.
But it will put pressure on pump prices, which, for the first time in four months, went up in the July review.
“Kenya Revenue Authority is collecting the 1.5 per cent duty on fuel discharges from July 1. It is a new cost that will be reflected in fuel prices going forward,” said Martin Kimani, the supply manager at Kenolkobil on Thursday, noting that a number of ships have discharged petroleum products at the port of Mombasa since the new levy became effective.
The ERC directed that the price of diesel be increased by Sh3.70 per litre to Sh102.86 and that of petrol by Sh1.34 per litre to Sh109.52 in Nairobi beginning Sunday midnight to August 14.
This was due to rising global oil prices and a weaker shilling.
The move that is expected to put pressure on inflation that hit a nine-month high in June after cost of living measure rose 4.91 per cent from 4.05 per cent a month earlier.
The effects of the levy coupled with volatility in the currency market and fears that violence in Egypt could ignite conflict in the broader Middle East, which pumps a third of the world’s oil, will continue to put pressure on fuel prices.
The economy heavily depends on diesel for transport, power generation and to power farm machinery, underlining its impact on inflation — which remains with the government single digit target.
Domestic energy prices are reviewed monthly with adjustments made depending on fluctuations in international prices and foreign exchange.
