Ministry to Redirect Fuel Levies in Subsidy Reforms

The government plans to divert levies collected from petroleum products by Kenya Revenue Authority (KRA) from their current usage. This is to help reduce the cost of energy and bolster transition to clean options.

The State’s proposal contained in a White Paper is part of subsidy reforms planned by the Ministry of Energy.

“Plan is to redirect fuel levies to support a shift away from fossil fuel and encourage more pro-poor design,” the recommendations on the Ministry’s website read in part. 

It recommends a regulatory framework that will allow the National Treasury to form alternative tax schedules on energy products to promote adoption of clean energy. 

The proposals are subject to public participation. Kenya is reliant on subsidies to manage energy costs. 

Recent 15 percent power bill cut and Petroleum Development Levy (PDL) which funds the fuel subsidy kitty are some of the State-cushioning plans that have offered much reprieve to businesses and households.

Poor utilisation of PDL has, however, been a hot debate after the Auditor General revealed in February that Treasury diverted about Sh2.1 billion from the fund to undisclosed firms and other State agencies, draining the cash meant to cushion motorists against costly fuel.

If the proposals are implemented, it implies that motorists will be exposed to high pump prices even if the government decides to continue collecting various levies including PDL which has been in full operation since April 2021.

Petroleum Development Levy is currently charged at Sh5.4 per litre on Petrol and Sh2.9 on Diesel used for price stabilisation but has depleted numerous times due to the spike in global crude oil prices.