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Tuesday, August 3, 2021

Why fuel is cheaper in Kampala and Dar than Nairobi

The Frontier Post Reporter

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Kenyan motorist pay Ksh30 per litre of petrol in Nairobi than their Dar es Salaam counterparts, thanks to steep taxation imposed on the oil products in the country.

In Uganda, a landlocked country that imports the bulk of its fuel supplies through Kenya’s Mombasa Port, motorists are paying Sh6.59 less per litre of petrol in Kampala compared to the cost in Nairobi.

In Kampala for instance, a litre of petrol is retailing at Ush3,890 per litre, which is equivalent to about Ksh116 compared to the Ksh122.81 a litre in Nairobi while in Dar es Salaam, motorists part with Tsh1981 a litre which is equivalent to Ksh93.67.

Kenya and Tanzania both have a port and both have price controls on fuel, which caps the margins for oil marketers.

However, a numerous taxes imposed on the commodity has seen prices of basic commodities rise high for the Kenyan consumer, who carries the heaviest burden.

EPRA increased super petrol by Sh7.63 per litre, diesel by Sh5.75 per litre and kerosene by Sh5.41 per litre; pushing the fuel prices to a nine-month high.

A majority of households relies on kerosene and gas for lighting and cooking, and increasing the cost of the product only pushes them to the brink of starvation and depression.

Kenya still a developing country still uses diesel for transportation, power generation and running of agricultural machinery such as tractors which has a direct impact on the cost of farm produce.

The increase, which is the fourth consecutive rise in the past four months, is set to push up the cost of transport, electricity and manufactured goods.

In the March review, taxes and levies will now account for Sh57.33 for every litre of petrol in Kenya, which is more than 100 percent the actual cost of the commodity.

Interestingly, there are excise duty, road maintenance levy, petroleum development levy, and petroleum regulatory levy, railway development levy, anti-adulteration levy, merchant shipping levy, import declaration fee and the Value Added Tax (VAT) all being taxed from the oil products.

Such punitive taxes are mostly seen on luxury products, and unnecessary imports.

In July last year the government quietly introduced a 1,250 percent increase of petrol levy to Sh5.40 from Sh0.40, which has seen the taxman collect about Sh2 billion monthly from fuel consumers. 

But by slapping such heavy taxes on fuel, being what runs the economy, the government has ensured that it collects the maximum taxes from every drop. 

The costs of energy and transport have a significant weighting in the basket of goods and services that is used to measure inflation in Kenya.

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