President Uhuru Kenyatta has once again hit the poor hard after proposing a Sh18 per litre raise on kerosene prices to stop rogue dealers from blending the cooking and lighting fuel with diesel.
The measure will for the first time push Kerosene prices above the Sh100 a litre with dealers expecting the product to retail at Sh112.15 a litre in Nairobi after the halving of VAT.
Unscrupulous traders are adulterating diesel since paraffin, which attracts lower taxes, is Sh18 cheaper per litre despite the Treasury raising Kerosene excise duty by Sh3.10 to Sh10.31, making the practise highly profitable.
Fuel adulteration leads to economic losses in unpaid taxes, deterioration in performance of engines and unfair competition.
“There is need to harmonise the price of kerosene to that of diesel by introducing an anti-adulteration levy,” Mr Kenyatta said in a memorandum to Parliament.
He is proposing a new levy to be known as the anti-adulteration levy on all illuminating kerosene imported into the country for home use.
“The levy shall be at the rate of Sh18) per litre of customs value of illuminating Kerosene and shall be paid by the importer at the time of entering the illuminating Kerosene into the country,” Mr Kenyatta’s proposal that MPs will consider tomorrow (Thursday) reads.
This will see the prices of kerosene and diesel retail at nearly the same price effectively sealing the loophole for adulteration of fuel.
Diesel is expected to retail at Sh112 a litre after the halving of VAT to 8 per cent while petrol will go for Sh118.
The higher kerosene tax will hit poor homes that rely on it to power cooking stoves and lantern lamps hard, along with small-time fishermen who use kerosene lamps for night-time fishing.
It will also put pressure on paint prices given it a key raw material in the manufacture of the product.
In June, Treasury secretary raised the excise levy on kerosene from Sh7.21 per litre to Sh10.31 for the same volume to match that of diesel.
Petroleum Institute of East Africa (PIEA) — the oil marketers lobby — reckons that 80 per cent of imported kerosene is still being blended with diesel, mostly by independent dealers.