The government has denied consumers relief at the pump for the second consecutive month, after it opted not to tap the fuel subsidy to prevent pump prices from jumping by Sh9 per litre.
In the latest price review that ends on August 15, pump prices were not subsidised, adding to the previous monthly cycle (June 15-July 14), which consumers missed out on the subsidy.
Pump prices on Monday this week jumped by the biggest margin in over two years, with a litre of petrol increasing by Sh8.99 to Sh186.31 in Nairobi. The price of a litre of diesel jumped by Sh8.67 to Sh171.58 in the capital city, while that of kerosene jumped by Sh9.65 to Sh156.58.
Treasury CS John Mbadi yesterday failed to disclose whether the Petroleum Development Levy (PDL) kitty has been depleted, barely a year after the government illegally tapped money from another fund to subsidise pump prices.
“The government chooses when to intervene. Epra felt that we did not need to do it (apply subsidy) this time. Remember that the kitty also has other uses and you can deplete the kitty. Epra felt that the increase in pump prices could be absorbed but if we see prices going higher, then the government will intervene,” Mr Mbadi said.
In the year to June 2024, the government illegally tapped Sh58 billion from the Railway Development Levy to cushion consumers against costly fuel, signalling inadequate cash in the PDL kitty or its depletion.
The subsidy has at times prevented pump prices from rising by upwards of Sh9 per litre of diesel, Sh7 per litre of petrol and Sh8 per litre of kerosene.
However, heavy subsidisation of fuel coupled with diversion of PDL collections has significantly drained the kitty in the past.
The State collected an estimated Sh43.9 billion from PDL between July 2023 and March this year. The levy is charged at Sh5.40 for every litre of petrol and diesel and Sh0.40 per litre of kerosene.
Depletion of the PDL kitty has been attributed to diversion of money to settle debts outside the petroleum sub-sector, contrary to the law that governs how PDL cash is used.
For example, in the 2020/21 financial year, some Sh18.1 billion was withdrawn from the PDL and used to pay the Chinese firm operating the Standard Gauge Railway in the 2020/21.
The International Monetary Fund (IMF) had given Kenya until January this year to publish a comprehensive audit of the fuel stabilisation scheme since its inception in 2021.
Kenya had assured the IMF that it would only subsidise pump prices when there are funds available in the PDL kitty.
IMF had identified non-budgeted spending on fuel subsidies as a major fiscal risk, prompting the demand for an audit of the scheme.
The Treasury had in the past struggled to pay off oil marketers under the fuel subsidisation scheme, underscoring the downside of the government’s efforts to cushion consumers against costly fuel.
The struggles prompted the decision to float a bond of Sh45 billion two years ago in exchange for debt owed to oil marketers.
PDL has been integral in helping to cushion consumers against costly fuel in recent times. For example, between July last year and this month, the government has only failed to tap the kitty on four occasions.
A decision to increase the Roads Maintenance Levy (RML) from Sh18 to Sh25 for every litre of petrol and diesel from July last year has further heightened the importance of the subsidy.
