The Energy and Petroleum Regulatory Authority (EPRA) has announced that it will be raising fuel prices starting tomorrow, following the implementation of the Finance Act 2023. In a statement released on Thursday, June 29, EPRA explained that the adjustment was necessary due to the doubling of the Value Added Tax (VAT) on fuel from eight to sixteen percent.
The additional eight percent VAT imposed on petroleum products is expected to have wide-ranging effects, including an increase in fuel prices per litre, the cost of basic household commodities, and national revenues. Just two weeks ago, EPRA had reviewed fuel prices, leading to a decrease in the cost of petroleum products. However, with the introduction of the new tax, the price of petrol is projected to rise significantly.
According to EPRA's calculations, the additional eight percent VAT equates to an increase of Ksh14.59. In Nairobi, this means that petrol is expected to retail at Ksh196.9 per litre, up from the current price of Ksh182.4. Similarly, diesel prices are projected to increase from Ksh167.28 to an average of Ksh180.6624 per litre at fuel stations in Nairobi. Kerosene will also see a price hike, with an average retail price of Ksh174.39 compared to the current price of Ksh161.48.
President William Ruto believes that the 16 percent increment in fuel prices will make them more competitive, thus attracting foreign investors. He sees this as an opportunity to position the country as an attractive investment destination. The National Assembly's Committee on Finance and Planning also emphasized the positive impact of increasing the VAT tax, stating that it would simplify the tax structure for both oil marketing companies and the government.
Kuria Kimani, the Finance Committee chair, explained that the move to double the VAT was driven by international commitments to transition to clean energy consumption. He mentioned the global discussion surrounding climate change and the shift away from fossil fuels towards clean energy. By standardizing the VAT rate, Kenya aims to align with the global trend and contribute to environmental sustainability.
As the EPRA prepares to implement the new fuel prices, consumers and businesses will need to adjust to the increased costs. The impact will be felt not only at the pump but also in the prices of essential goods and the overall economy.