Fuel prices go sky-high in Epra VAT review

An attendant fuels a car at a Rubis petrol station in Nairobi. FILE PHOTO | NMG

The Energy and Petroleum Regulatory Authority (Epra) has revised pump prices upwards in the wake of the doubling of the value added tax (VAT) on petroleum products to 16 percent, going against a court order Friday suspending the Finance Act, 2023.

Fuel prices will jump from midnight with petrol increasing by Sh13.49 per litre, diesel Sh12.39 and kerosene Sh11.96.

In Nairobi, a litre of super petrol will retail at Sh195.53 while that of diesel will jump to Sh179.67 — the highest since Kenya started capping pump prices.

Epra released the new prices minutes after the High Court suspended the implementation of the Act, days after President William Ruto assented to it, paving the way for the doubling of VAT on fuel from 8.0 percent effective July 1.

High prices will trigger a fresh round of inflation as goods’ manufacturers, power producers and service providers factor in increased costs of fuel, ultimately hurting Kenyans already beset by tough economic times.

“Pursuant to the Finance Act, 2023, VAT on super petrol, diesel and kerosene has been revised from 8 percent to 16 percent effective 1st July 2023. Accordingly, Epra has recalculated the maximum pump prices that will be in force from 1st to 14th July 2023 taking into account VAT at 16 percent,” the energy regulator said Friday.

The new fuel prices will prompt costlier electricity, a fresh spike in cost of goods and agricultural produce and costlier services.

Electricity bills will also jump further given that higher fuel prices will trigger an increase in the fuel cost charge (FCC) — the single biggest component in electricity bills.

FCC is reviewed every month to mirror the changes in fuel costs, meaning that the impact of the new diesel prices will be factored in electricity bills for July.

Doubling of VAT denies Kenyans the benefits of the current drop in global prices of crude. The commodity is currently retailing at $73.02 per barrel, from a high of $87.88 in January.

The sustained drop in global costs of crude would have handed consumers a huge reprieve following the removal of the fuel subsidy that had cushioned Kenyans from April 2021.

The new VAT rates are expected to give the Kenya Revenue Authority (KRA) Sh128.98 billion annually from the current Sh64.5 billion. The collections will, however, depend on fuel consumption and global prices of crude oil.

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