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State proposes fuel levy hike to bolster road maintenance

Transport Cabinet Secretary Kipchumba Murkomen before the Departmental Committee on Finance and National Planning on June 11, 2024. (Photo: X/Kipchumba Murkomen)

By Lucy Mumbi | Wednesday, June 12, 2024

This will mark the first proposed review since 2016.

Fuel prices may rise significantly if Parliament approves a government proposal to increase the fuel levy from Sh18 to Sh25 per litre.

This will mark the first proposed review since 2016.

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Transport Cabinet Secretary Kipchumba Murkomen informed the Finance and National Planning Committee on Tuesday that the additional levy is essential to bolster efforts in road maintenance across the country.

Murkomen explained that the 39 per cent increase in the fuel levy would allow the government to collect approximately Sh115 billion up from the current Sh83 billion.

"If the levy increment is not approved, the country may have to endure delays in road maintenance,” Murkomen said.

Murkomen cited the significant backlog in road maintenance, which stood at around Sh727 billion as of 2022.

He highlighted that inflation has drastically reduced the purchasing power of the current Sh18 levy, necessitating an adjustment to meet rising construction and maintenance costs.

“As of May 2024, the pump price is Sh194 while the fuel levy remains at Sh18 per litre. This difference illustrates the loss of purchasing power of the fuel levy over time due to inflation," Murkomen said.

Finance Bill, 2024

The Transport CS urged the parliamentary committee, led by Molo MP Kuria Kimani, to incorporate the fuel levy hike in the Finance Bill, 2024.

Murkomen also pointed out the recent April-May floods that damaged various roads, reinforcing the need for increased funding.

However, the proposed fuel levy hike, combined with the VAT increase in the Finance Act 2023, is expected to push fuel prices beyond the Sh200 mark, significantly impacting the cost of essential foodstuffs and services.

In the May review, the Energy and Petroleum Regulatory Authority (EPRA) reduced the fuel prices by Sh1.

In the prices which took effect from May 15, 2024, to June 14, 2024, prices of super petrol dropped by Sh1 per litre, diesel by Sh1.20 per litre and kerosene by Sh1.30 per litre.

In Nairobi, super petrol currently retails at Sh192.84, diesel at Sh179.18 and Kerosene at Sh168.76.

The Authority said the prices are inclusive of the 16 per cent Value Added Tax in line with the provisions of the Finance Act 2023, the Tax Laws (Amendment) Act 2020 and the revised rates for excise duty adjusted for inflation as per Legal Notice No. 194 of 2020.