State dilemma as LPG (cooking gas) tops household burden

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BUSINESS DAILY>>> Expensive cooking gas due to high State taxes and a surge in global prices has now become the biggest burden for households in Kenya, threatening hard-won gains in the climate-change fight, data by the statistics office show.

The latest assessment of prices of basic commodities by the Kenya National Bureau of Statistics (KNBS) shows that the cost of liquefied petroleum gas (LPG) posted a 24.5percent jump in October compared to a similar period last year—the highest jump among the prices of goods in a consumer basket that is used to track inflation in the market.

Kenyan households have since June 2016 been enjoying low cooking gas prices after the Treasury scrapped the tax on LPG to cut costs and boost uptake among the poor who rely on dirty kerosene and charcoal for cooking.

But LPG prices have surged on the reintroduction of the 16 percent VAT tax from July 1—hitting its highest since 2015. Prices for the 13-kilogramme cooking gas fell to below Sh2,000 in October 2016 after the Treasury scrapped the 16 percent VAT.

However, according to the KNBS, refilling a 13kg cylinder of cooking gas now costs Sh2,513.74 on average — a 24.5 percent rise compared to October last year’s price of Sh2,445.23.

It cost Sh2,019.14 or Sh494.6 less to buy 13kg of cooking gas in October last year than it did last month.

The high cost of LPG turns the spotlight on the government, analysts said, at a time the world is desperate to boost uptake of clean energy and reduction in use for dirty kerosene and charcoal.

“There is potential for consumers to look for alternatives,” said Victor Otieno, a research fellow at the Strathmore Energy Research Centre (SERC).

The government has over the years pressed for uptake of LPG and solar for household use as part of a strategy to curb respiratory diseases and environmental degradation.

“The exorbitant cost of LPG on high taxes and levies have eroded the gains on health and the environment,” said Consumers Federation of Kenya (Cofek) Secretary-General Stephen Mutoro.

“Increasingly, people are reverting to cooking with firewood, charcoal, and kerosene. This is not only an economic burden but a clear indication that Kenyans are staring at a health crisis.”

Parliament reintroduced the tax despite opposition from lobbies who wanted it delayed in the wake of the coronavirus-induced hardships that have hurt the purchasing power of households.

The rise in the cost of LPG and other fuels has been blamed on the taxation regime, prompting calls for the reduction of the levies.

The rising cost of LPG is set to hurt growth in consumption of cooking gas that has more than doubled in the past five years on the removal of the 16 percent VAT, experts and lobbies said yesterday.

Mr Otieno said while the risk to turn to dirty fuels might be “minimal” compared to five years ago, low-income Kenyans have few options and therefore the State must adopt a policy shift “if we are keen on addressing issues to do with climate change”.

He proposes subsidising LPG kits to address barriers to uptake, review of VAT on LPG, and adoption of alternative fuels like biogas.

LPG prices are not controlled unlike other petroleum products and the new tax will fuel fears that dealers could exploit the market forces to their advantage, even as international crude prices continue to rise.

“Programmes like the fuel subsidy and potential price controls could help moderate the price swings through their sustainability in a high deficit environment is arguable,” said NCBA researchers in a research note.

The energy regulator in 2010 started controlling prices for diesel, petrol, and kerosene to cushion consumers from high prices, blamed on cartel-like behaviour among dealers.

“This is a concern. We will see more charcoal coming into the market and you know what that means to the Kenyan ambition to achieve 10 percent forest cover,” said Edward Mungai, the chief executive of the Kenya Climate Innovation Center.

Studies have identified charcoal production as one of the main drivers of deforestation and forest degradation in Kenya. The traditional methods of making charcoal lead to high carbon emissions and are a waste of wood resources.

The rise in the cost of cooking gas is expected to pile pressure on households that are struggling to foot daily bills due to job losses and drastic cuts in earnings in the wake of the coronavirus pandemic.

LPG uptake more than doubled to 326,000 tonnes last year from 151,000 tonnes in 2016, highlighting the impact of removing the tax.

LPG remains the second most used fuel for cooking at 23.9 percent of Kenyan households after kerosene at 55.1 percent.

Under the UN, the world has committed itself to ensuring universal access to modern energy for cooking by 2030.

This is through the Sustainable Energy for All (SEforAll) and Sustainable Development Goal 7 for affordable and clean energy.

Under the Paris Agreement, Kenya committed to reducing its greenhouse emissions by 30 percent, with clean cooking expected to contribute approximately 14 percent of this target.

Heads of State, leading scientists, and environmental activists have converged on Glasgow, Scotland, for the 26th Conference of Parties (COP).

KNBS data shows inflation dropped to 6.45 percent from last month’s 6.91 percent which is a 19-month high.

The food and non-alcoholic drinks index, however, increased by 1.11 percent as the increase in the price of some food items outweighed the decrease in others.

Household air pollution claims over 21,500 lives each year, a study commissioned by the Energy ministry shows, highlighting a silent death-trap inside homes.

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