Economy

Uhuru’s order on fare control has no legal backing

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PSV operators have increased fares by an average of 20 per cent after fuel prices rose over the new tax. FILE PHOTO | NMG

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Summary

  • President Uhuru Kenyatta directed PSV operators not to raise fares beyond the rates recommended by the NTSA after the 16 per cent VAT on all petroleum products took force on September 1.
  • The PSV operators said the fares displayed inside their vehicles are a mere guide to passengers and not legally binding.
  • The operators have increased fares by an average of 20 per cent after fuel prices rose over the new tax.

President Uhuru Kenyatta’s directive to the transport regulator to withdraw licences of public service vehicle (PSV) operators overcharging passengers on the new fuel tax is not backed by law.

Mr Kenyatta directed PSV operators not to raise fares beyond the rates recommended by the National Transport and Safety Authority (NTSA) after the 16 per cent VAT on all petroleum products took force on September 1. Lawyers, matatu operators and NTSA sources said that the transport regulator has no power to regulate fares. Simon Kimutai, chairman of the Matatu Owners Association — whose members control 80 per cent of the country’s public transport sector — said NTSA has no legal mandate to set fares, adding that ticket prices are influenced by market forces.

The PSV operators said the fares displayed inside their vehicles are a mere guide to passengers and not legally binding.

The operators have increased fares by an average of 20 per cent after fuel prices rose over the new tax. Mr Kenyatta has proposed it to be cut to eight per cent from 16 per cent following a public outcry. “At the meeting, President Kenyatta emphasised that transporters should not take advantage and increase fares beyond those recommended by the NTSA,” State House said in a statement after reaching a deal with ruling party MPs to back the fuel tax.

“The President warned that any transporter who will increase fares beyond the recommended ones will lose their PSV licences.” NTSA Director-General Francis Meja did not respond to the Business Daily on Mr Kenyatta's orders on fares. Fuel prices have risen by 12 per cent to an average of Sh128.70 per litre of super petrol in the wake of the new tax.

Last Thursday Mr Kenyatta rejected the Finance Bill that sought to postpone the tax altogether. Parliament will meet today to examine Mr Kenyatta’s new proposal. Implementation of the new VAT on fuel is key to government plans to close gaps in its fiscal deficit and funding essential programmes.