CUSTOMERS

Oil marketers have declined to lower cooking gas prices four months after halving Value Added Tax (VAT) to eight percent, denying consumers accruing benefits.

The 13-kilogramme cylinder is retailing at up to Sh3,330 while the six-kilogramme unit going at Sh1,540—the same levels as August.

This means marketers have chosen to pocket the tax cut and deny consumers the benefits in what has continued to push up the cost of living.

The high prices have persisted despite halving of VAT on Liquefied Petroleum Gas (LPG) from eight percent effective July 1 that were expected to trickle down to Kenyans hurt by a spike in the cost of living.

Unlike super, diesel and kerosene, the State does not control prices of LPG leaving consumers at the sole mercy of oil dealers.

Enactment of the Finance Act, 2022, which cut VAT on LPG from 16 to eight percent was expected to gradually help cut prices of the commodity and offer relief to consumers.

The spot-check shows that prices are highest at TotalEnergies marketing with the 13-kilogramme gas going for Sh3,330 and the six-kilogramme container at Sh1,540.

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Vivo Energy— retailer of Shell-branded fuel products— is the second most expensive with the 13-kilogramme gas going for Sh3,100 and Sh1,440 for the six-kilogramme commodity. LPG prices fell by an average of Sh200 for the 13-kilogramme gas and Sh100 for the six-kilogramme weeks after the law that halved VAT on the commodity took effect.

The high prices have piled more pressure on homes that are grappling with a five-year high inflation rate.

Inflation hit a five-year high of 9.2 percent last month squeezing budgets of homes that have been forced to cut spending on non-core items.

But oil dealers have since failed to adjust the prices further with consumption of the commodity waning in the first half of the year.

Data from the Kenya National Bureau of Statistics shows that Kenyans consumed 123,150 tonnes of cooking gas in the six months to June this year, down from the 188,850 tonnes in a similar period last year.

The drops highlight concerns from lobbies in the clean energy sector that homes have turned to dirty fuels like charcoal and firewood.

Besides polluting the environment, dirty fuels cause respiratory tract infections, heart diseases, stroke and cancers. The government has stepped up efforts to lower LPG prices in the absence of price controls by licensing more firms to handle cooking gas imports and also the importation of natural gas from neighboring Tanzania.

Ola Energy and Lake Gas have been given go-ahead to construct berths for handling cooking gas, a move that is expected to lower prices due to cuts in the cost of handling gas charged on marketers.

A single private firm currently handles imported gas at the Port of Mombasa, locking out the competition in the handling fees that is key to lowering prices.

The company handles an estimated 90 percent of the cooking shipments while the rest comes in from Tanzania through the Namanga and Holili border posts.

Kenya has also committed to speed up construction of a 600-kilometre gas pipeline that will be used to evacuate natural gas from Mtwara in Tanzania, further providing more options for consumers and at cheaper prices.

President William Ruto during his visit to Tanzania committed to fasten the project that will upon completion see Kenya import natural gas at cheaper rates and step up competition on the private firms.

The gas pipeline from Tanzania and licensing more players to handle LPG imports offers Kenya the most viable way of lowering prices of the commodity at the back of delays in building a common user facility at the Port of Mombasa.

The berth that will be built at the recently completed Kipevu Oil Terminal Two will allow the government to import LPG through Open Tender System like other fuels, setting the stage for price controls.

SOURCE: Business daily