Uproar as Hiked Road Levy Dashes Consumers’ Hope for Cheaper Fuel

Fuel consumers in Kenya are expressing outrage over the government’s decision to raise the Road Maintenance Levy by Sh7, effectively nullifying the potential benefits of declining global oil prices. Public Service Vehicle (PSV) operators have threatened protests in response to the increase, which has kept fuel prices high despite a decrease in global crude oil costs.

The Energy and Petroleum Regulatory Authority (EPRA) recently reduced fuel prices by an average of Sh1 in its July 14th review. However, the increased road levy has counteracted this reduction, maintaining high fuel prices in the domestic market. Consumers in Nairobi now pay Sh188.84 per litre of super petrol, Sh171.60 for diesel, and Sh161.75 for kerosene. Without the levy increase, they could have paid Sh6 less per litre.

Former Cabinet Secretary Kipchumba Murkomen had previously assured Kenyans that alternative methods would be sought to avoid directly affecting fuel prices. Nevertheless, the recent move has sparked widespread public dissatisfaction, particularly given the significant drop in global oil prices. Over the past four weeks, global oil prices have declined by six percent, with Murban Oil prices falling from $88.64 (Sh11,634) per barrel on June 2 to $83.28 (Sh10,930) per barrel. Other benchmarks, such as Brent and West Texas Intermediate (WTI) crude oil, have also seen price reductions.

The Central Bank of Kenya’s data highlights the consistent decline in global oil prices, attributing it to a balance in demand and supply and a buildup of oil inventories amidst increased geopolitical uncertainties. Despite this, the hiked road levy has led to stagnant fuel prices, causing financial strain on households and businesses.

PSV stakeholders have issued a seven-day strike notice, demanding the immediate repeal of the levy. The Motorists Association of Kenya (MAK) has condemned the increase as illegal and called for structural reforms to improve transparency and accountability in the sector. Peter Murima, the chairperson of MAK, stated, “We, the undersigned, reject the illegal increase of the road maintenance levy.”

Oil and gas expert David Maundu criticized the government’s decision, stating that the hike denies Kenyans the opportunity to benefit from the lowest fuel prices in over a year. “Global fuel prices have been tanking and are expected to hit a two-year low in August. It is bad for the government to ignore public input which could have seen a litre of petrol retail close to Sh180,” Maundu said.

The Kenya Association of Manufacturers (KAM) is currently assessing the impact of the additional road levy on production. An anonymous senior official from KAM mentioned, “We are reviewing the impact of this addition on production. Either way, it denies our members the much-needed competitive production advantage that comes with cheaper fuel, currently enjoyed by peers in the global market.”

Investment and economics analyst Stellar Swakei has called for the Road Maintenance Levy public participation report to be made public. “We want to compare what Kenyans wanted/said vs. what the government did. Otherwise, it was just formality. Taxes & levies on petrol are almost catching up with the prices,” Swakei told the Star.

The government, however, has defended the levy increase, stating that it is part of a normal review process. The Road Maintenance Levy, first introduced in 1994 at Sh1.5 per litre, has seen periodic increases over the years, with the latest hike being from Sh18 to Sh25 per litre. The Ministry of Transport aims to generate over Sh115 billion by June next year from the increased levy to support the maintenance of the country’s 239,122-kilometer road network.

The ministry argues that the levy has remained unchanged since 2016 despite economic changes such as exchange rate fluctuations and inflation. The current hike is projected to raise annual collections from Sh80 billion to Sh115 billion. This is slightly lower than an earlier proposal to set the levy at Sh28 per litre, which would have increased annual revenue to Sh129 billion.

The ministry’s statement emphasizes that the inflationary environment and the depreciation of the Kenyan shilling against the dollar have impacted the cost of construction materials for road works, most of which are imported. The Road Sector Investment Programme (RSIP) 2018-2022 indicates that the maintenance backlog due to delayed maintenance was Sh445 billion, growing to Sh727 billion this year. The annual requirement for road maintenance is approximately Sh157 billion, necessitating the increase in the Road Maintenance Levy.

Despite the government’s justifications, the public outcry continues, with consumers and industry stakeholders demanding immediate action to alleviate the financial burden imposed by the high fuel prices.