Parliament has recommended a steep increase in kerosene taxes to eliminate its use in the adulteration of petroleum.
The move was taken after the National Assembly’s Energy committee learnt that Kenya has lost 100 per cent of the Rwandan petroleum export market and 30 per cent of the Ugandan market because of rampant adulteration.
The move however, is bound to hurt poor households that rely on kerosene to cook food and light up their homes.
The committee said Kenya’s loss of its share of the fuel market in the neighbouring countries to Tanzania is mainly the result of pricing differences between petroleum and kerosene or diesel. Tanzania has same prices for the three commodities.
“The pricing is because of the difference in fuel taxes for diesel and kerosene and we should therefore consider reviewing it,” Jackson Kiptanui, the vice chair of the Energy committee, told the Budget Committee, while presenting the 2016/17 budget report for the Ministry of Energy and Petroleum.
Mr Kiptanui said Kenya needed to make prices of kerosene and diesel at par to ensure that petroleum dealers don’t make any gains by mixing the two.
The Energy Regulatory Commission (ERC) on May 14, 2016 set the prices of petroleum products, pushing up the price of a litre of kerosene by Sh3.02 to Sh46.98 while diesel rose to Sh70.37 up from Sh66.23 last month.
The pump price differences arise from the fact that kerosene is charged excise duty of Sh5.75 a litre, diesel Sh8.24 while petrol is levied Sh19.89 per litre.
Diesel and petrol also attract a road levy charge of Sh9 a litre that does not apply to kerosene.
Low priced kerosene, though good for the millions of poor households that use it for heating and lighting, has become the means by which unscrupulous traders adulterate petroleum to increase their profit margins.
The ERC late last year reintroduced tax on kerosene after President Uhuru Kenyatta assented to the Excise Duty Bill — which increased levies on items like water, beer, cigarettes, juices and used cars.
The move, however, fell short of demands by the Petroleum Institute of East Africa (PIEA) — the oil dealers’ lobby — to remove kerosene subsidy because of its use to adulterate the more expensive petrol and diesel.
PIEA has been lobbying the Treasury to increase kerosene taxes to the level of petroleum, but the government has been hesitant because of its possible impact on poor households.
Parliament’s bid to have kerosene and diesel taxes reviewed appears to be in line with the oil dealers’ lobby who feel the Sh5.75 kerosene tax is not enough to bridge the gap between it and diesel or petrol.
“If the price of diesel and kerosene are the same, no petroleum dealer will be tempted to mix the two,” said Mr Kiptanui. The total value of Kenya’s export of petroleum products rose 12 per cent to 59.5 billion in 2015, while that of re-exports rose by 12.3 per cent to Sh59.5 billion, according to the 2016 Economy Survey.