Premium cooking Gas brands enjoy Huge margins amid Regulation push

The 13-kilogram cylinder is priced differently by major cooking gas retailers by up to Sh500, highlighting the substantial margins some players have built into the product despite calls for controls.

According to a spot check by the Business Daily, 13 kilograms of gas are sold for Sh3,330 and Sh3,320 at Total Energies and Vivo, respectively, as opposed to Sh2,790 at Rubis.

Rubis is selling the six kilograms for Sh1,190, while Total Energies and Vivo are asking Sh1,540 and Sh1,530, respectively.

The prices are significantly higher than the average Sh2,900 and Sh1,350 quoted by the small dealers for the 13-kilogram and 6-kilogram commodities, respectively.

Cooking gas prices are not regulated in Kenya, giving vendors the opportunity to raise prices by citing high taxes and a premium product on the international market.

The Energy and Petroleum Regulatory Authority (Epra) cites high overhead expenses for dealers with sizable markets as the cause of the significant price variation.

“The disparity in the LPG retail price may be attributed to difference in overhead costs between the multinationals and the small to medium sized companies.

Multinationals have higher asset base and hence incur higher cylinder maintenance and distributions costs that are passed to customers.” Mr Kiptoo said.

Cooking gas prices, unlike those for super, diesel, and kerosene, are not regulated by the government, leaving consumers at the mercy of merchants who have recently raised prices in response to rising taxes and rising crude oil prices worldwide.

In the past, dealers have raised prices while blaming increased taxes, a global rise in crude prices, and the weakening shilling that has made imports more expensive.

Prior to two years ago, the reintroduction of the 16 percent Value Added Tax and the global rally in crude oil prices caused a sudden increase in cooking gas prices of up to Sh350.

However, after the VAT was cut in half to 8% last year, the dealers did not reduce prices, depriving consumers of the intended benefit of the tax change.

If the government’s proposal to eliminate three taxes on the commodity is approved by Parliament, prices for the 13-kilogramme are likely to drop by up to Sh430.

The Finance Bill for 2023 contains proposals to eliminate the 8% VAT, the 3.5% Import Declaration Fees, and the 2% Railway Development Levy.

In addition to tax reductions, the State is relying on the Kenya Pipeline Company’s proposal to construct a 30,000 tonne common-user facility for managing cooking gas imports in order to reduce the price of cooking gas.

The common user facility at KPC will enable the implementation of the open tender system for the importation of cooking gas, where the marketer with the lowest price proposal wins the tender to import the good on behalf of the industry, with maximum prices set by the State.