Cofek Statement on the rise and rise of fuel prices in Kenya

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The attention of the Consumers Federation of Kenya (Cofek) is drawn to the Tuesday announcement of the unusually high fuel prices by the sector regulator, Energy and Petroleum Regulatory Authority (EPRA).

At this rate, our earlier projection that fuel will hit a record Sh150 per litre may come to pass sooner than later.

A litre of petrol now retails at Sh134.72 in Nairobi. For starters, EPRA puts the landed cost at Sh60.35, Sh58.81 in levies and taxes, Sh12.39 as margins for the powerful oil marketers and a further Sh3.17 as distribution and storage costs per litre.

What this means is that even if the landed cost was zero, Kenyans will still part with Sh60.35 per litre of fuel in Nairobi.

Our considered view, therefore, is that there is missing top level political goodwill in government for cheaper fuel. The reason could be two-fold: conflict of interest and or a strong arm of the mighty and powerful oil marketing cartels.

For that reason, the EPRA formula established to stabilize fuel prices no longer serves the interest of the economy and the majority poorest of the poor consumers.

Again, the oversight role of Parliament and especially the National Assembly;s Energy Committee has been fatally compromised.

While government collects Sh5.40 per litre towards the controversial fuel development levy – it is inconceivable that government chose to drop the subsidy it has been running for the last few months.

For the record, Cofek is still in Court against the fuel development levy fund on account of being operated without regulations and a threshold of accountability.

The net effect of all these will be a huge hit on the economy – high cost of production, surge in food prices, transport and overall, a higher cost of living. The foreign direct investments as well as consumer purchasing power will be driven south for a struggling economy reeling under the Covid-19 pandemic.

Accordingly, Cofek calls for;

(a) return to a free fuel market economy and an immediate drop of monthly price fixing.

(b) change of leadership of the Gikaria Energy Committee and a replacement with people of high integrity and pro-public interest

(c) Review of tax and levies with a view to cutting the same by at least 50 per cent, cut the margins for oil marketers and enhance more efficiency in distribution and supply

(d) Suspend implementation of IMF decrees on the energy sector including removal of VAT on LPG (cooking gas)

Wednesday, September 15, 2021

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