10,000km roads plan to raise petrol prices

Taxpayers face a doubling of the fuel levy to as much as Sh18 a litre in the Jubilee government’s plan to tarmac 10,000 kilometres of roads across Kenya in five years.

The Kenya Roads Board (KRB) has written to the Treasury proposing a tax of Sh6 per litre of diesel and petrol as a road annuity levy and an additional Sh3 per litre towards the fuel levy beginning July — effectively doubling of the fuel levy to Sh18 per litre of fuel.

KRB — which collects and manages Kenya’s road maintenance levy fund (RMLF) — reckons that the current levy charged at Sh9 per litre, which was set in June 2006, is no longer feasible given the rise in raw materials, labour and transport costs, which has in turn increased the cost of building and maintaining Kenya’s road network.

“We are likely to have an improvement in the fuel levy in the next financial year. We want a doubling of the rate and have already discussed with the Treasury,” said Jacob Ruwa, executive director of KRB.

“The annuity programme has a road maintenance bit and it is natural that it will eat from the road maintenance levy fund. The figures are still being worked on,” said Mr Ruwa in an interview.

The proposal to charge a road annuity levy will help the Jubilee Coalition raise the Sh260 billion required to fund the annuity program over the next 10 years.

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Kenyans consumed 3.1 billion litres of diesel and petrol in the fiscal year ended June 2014, which saw collections from the fuel levy hit Sh28 billion.

This means the government stands to rake in at least Sh18.7 billion more annually from the proposed road annuity levy.

The annuity model will see contractors source for funds from lenders which will be applied to design, build and maintain the roads.

A payment modality will be agreed upon between the tripartite parties including the government, the contractor and the bank which financed the project — subject to certification of works and attaining set milestones.

The cost of the road projects will be pre-determined and the government will help negotiate low interest rates for the contractors, who will be signed to maintain the roads they have developed for about six years.

Under the annuity programme, the government plans to build 2,000 kilometres of small roads mostly in rural areas, within the current financial year ending in June.

In the next fiscal year starting July this year, 3,000 kilometres made up of 80 per cent small roads and 20 per cent highways will be built.

There are further plans to tarmac 5,000 kilometres of roads in the 2016/2017 financial year.