EPRA raises fuel subsidies, pump prices remain unchanged for 30 days

By Phyllis KONRAD

Motorists in Kenya are set to pay more at the pump after the Energy and Petroleum Regulatory Authority (Epra) increased fuel subsidies in an effort to boost margins for oil marketing companies and fuel transporters.

Meaning, the subsidy on petrol will go up from Sh2.41 to Sh6.92 per litre, while that on diesel will increase from Sh5.59 to Sh9.9 and on a litre of kerosene from Sh8.74 to Sh10.35 in the latest review.

The regulator has however, maintained pump prices for the next month to April 14.

As a result, a litre of petrol will continue to retail at Sh176.58 in Nairobi, diesel at Sh167.06 and a litre of kerosene at Sh151.39.

The regulator announced on Wednesday that the price adjustments are based on recommendations from a newly concluded study on the petroleum sector.

The proposed changes will see petrol prices rise by Sh7.80 per litre, with oil marketers benefiting the most from the revision. Retailers’ margins will go up by Sh4.59 per litre, while a finance surcharge of Sh0.69 per litre will also be introduced.

Additionally, wholesalers’ margins will increase by Sh1.64 per litre, transport margins by Sh0.64 per litre, and tariffs on secondary storage by Sh0.235 per litre.

Epra defended the changes, citing the need to support struggling oil marketers and transporters who have not received a margin review in years.

“Transporters have not had an increase since 2010; many of them have shut down,” Epra Director-General Daniel Kiptoo said.

When fuel subsidies increase, the price of fuel at the pump remains low, potentially leading to higher consumption, increased demand, and potentially higher global fuel prices, while also potentially distorting economic signals and discouraging investment in cleaner energy sources.

Who benefits from fuel price subsidies? 

According to Punam Chuhan-Pole, lead Economist, Corporate IDA & IBRD Department (DFCII) at the World Bank, the expenditure data for seven African markets, Kenya included, show that the distribution of these subsidies is disproportionately concentrated in the hands of the rich.

Richer households spend a larger amount on fuel products, and, consequently, benefit more than poorer households from any universal subsidy on these products. On average the richest 20 percent receive over six times more in subsidy benefits than the poorest 20 percent.