MPs declare Sh5.40 levy on diesel illegal

Parliament buildings in Nairobi. FILE PHOTO | NMG

By JOHN MUTUA
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Summary

• A parliamentary committee has declared the Sh5.40 levy on a litre of diesel invalid, setting the stage for removal of the charge that has partly led to costly fuel.
• The National Assembly committee on Delegated Legislation says that the Ministry of Petroleum did not seek public views ahead of issuing regulations that sought to give legal backing to the collection of the levy.
• The committee has recommended that MPs reject the legal notice in what could force the energy regulator to drop the levy from the monthly review of diesel prices.

A parliamentary committee has declared the Sh5.40 levy on a litre of diesel invalid, setting the stage for removal of the charge that has partly led to costly fuel.

The National Assembly committee on Delegated Legislation says that the Ministry of Petroleum did not seek public views ahead of issuing regulations that sought to give legal backing to the collection of the levy from diesel.

The regulations, which were published in May, were meant to fix a legal breach that omitted diesel from a law that allowed the State in July last year to collect the Sh5.40 Petroleum Development Levy.

The committee has recommended that MPs reject the legal notice in what could force the energy regulator to drop the levy from the monthly review of diesel prices.

This will offer motorists a relief in a period that has seen diesel prices jump Sh7.94 to Sh115.6 a litre — the highest in Kenya’s history.

Expensive diesel unleashes pricing pressure across the economy and has ramifications on the cost of living measure, which yesterday jumped to a 19-month high on costly fuel, cooking gas and electricity.

“The committee recommend to the House to annul the amendment order in entirety for contravening Section 11(1) and 4 of the Statutory Instruments Act, 2013, being out of the statutory timelines set out in Section 11 and lack of demonstration of public participation,” the committee says in a report to the House.

The levy was increased from Sh0.40 a litre, and the State has been collecting the Sh5.40 on both diesel and petrol, further putting pressure on fuel prices.

Petroleum Cabinet Secretary John Munyes told Parliament that the May notice was prompted by the realisation that diesel had been omitted in the regulations published last July, exposing the State to legal suits.

“Justification was that the order was published and approved in 2020, and it was discovered later that diesel had been erroneously omitted. The ministry now seeks to insert a new row to correct the omission,” Mr Munyes told lawmakers.

The manner the May legal notice was introduced in Parliament also breached the law that requires Cabinet Secretaries to table regulations for approval within 28 days after publication

Mr Munyes published the regulations in May, but sought parliamentary approval in August.

Fuel prices rose to the highest level in Kenya’s history after the State discontinued a subsidy scheme introduced in April to defuse public outrage over the high cost of living.

The subsidy scheme was supported by billions of shillings raised from fuel consumers through the levy, which fed the petroleum fund.

The State had since March offered consumers of diesel and kerosene a subsidy, with those using petrol enjoying the benefit with the exception of the May review.

This saw the regulator keep diesel and kerosene prices unchanged since April at Sh107.66 and Sh97.85 a litre respectively on fears an upward review could fuel public anger. Petrol had remained unchanged at Sh127.14 since June.

The jump in fuel prices is also partly linked to costly crude attributed to signs of demand growth as the global economy recovers from the Covid-19 disruptions.

The current pump prices are based on the barrel at $72.34, up from $66.70 previously, and an estimated $42.35 a year ago.

Crude has since hit $80, pointing to more pain at the pump.

Kenyans on social media have recently raised concerns over reduced cash flow, fewer employment opportunities and mounting public debt.

Kenya was hit hard at the onset by the pandemic, but its economy has been picking up after posting a contraction of 0.3 percent in 2020.

The costs of energy and transport have a significant weighting in the basket of goods and services that is used to measure inflation in the country. Producers of services such as electricity and manufactured goods are also expected to factor in the higher cost of petroleum.

The economy also uses diesel for transportation, power generation and running of agricultural machinery with a direct impact on the cost of farm produce.