• Thursday, 01 December 2022
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High LPG Prices Pushing Kenyans To Charcoal, Bad For Environment And Health

High LPG Prices Pushing Kenyans To Charcoal, Bad For Environment And Health

When the Energy and Petroleum Regulatory Authority (EPRA) began controlling energy product prices in 2010, it affected, among others, diesel, petrol, and kerosene products to cushion consumers from high prices.

However, the price of Liquid Petroleum Gas (LPG) coming into the Kenya market was not among the affected products. This was the beginning of the regulatory schism between LPG pricing and other petroleum products imported into the country.

In June 2016 a watershed moment took place for the LPG industry in Kenya when the government made good an environmental policy to cut back on dirty (Kerosene, charcoal, and firewood) sources of energy by encouraging the use of clean energy (LPG).

The government, through the Treasury, scrapped the value added tax levied on the LPG to cut its costs and make it attractive to Kenyans across the financial divide. This, of course was very good for the environment, better health for households, and great for low-income households.

Prices for the 13-kilogram cooking gas fell to below Ksh.2,000 by October 2016 after the Treasury scrapped the 16 percent VAT. Concurrently, LPG uptake more than doubled to 326,000 tons by 2017 from 151,000 tons, highlighting the impact of removing the tax.

Five years later in April 2021, the 13-kilogram cooking gas was retailing at Ksh.2,250 when Kenya Revenue Authority (KRA) announced that by 1 July 2021, it would impose a 16 percent VAT tax on LPG, hence rescinding the green policy favouring LPG that the government had implemented in 2016.  On the due date, the 13-kg LPG cylinder began selling at Ksh.2,610 as a result of the new tax measure.

So when on 11th May, there was a week-old hold-up of more than 200 LPG trucks at the Kenya-Tanzania border over a tax dispute, it came as no surprise, the government’s tax policy on LPG is at best confusing! Affected LPG traders who import their product from Tanzania said in line with the tax increments, they would be forced to raise their pricing from Ksh.170 per kilo to Ksh.250 per kilogram.

Media reports cited traders who blamed the government for allegedly increasing applicable taxes charged on trucks in transit ferrying the LPG into Kenya.

KRA, on the other hand, insisted that during a recent random compliance check it identified cases of undervaluation by LPG importers, which is an offense. It then issued a compliance advisory to the Namanga Border Station for implementation and the reports were provided to the affected traders to achieve full compliance after which they will be facilitated to clear their LPG consignments. All this back and forth can only mean one thing, more pain at the till for households.

It should however not be lost on Kenyans that the country draws its petroleum imports from the Arabian Peninsula which has been hit by supply chain disruptions owing to the invasion of Ukraine by Russia. Globally, this situation is replicated as fuel and petroleum product prices are inching higher every so often.

Spot checks at Rubis Energy Loresho indicate that the retail price for the 13kg cylinder is Ksh.3,340. The cost of the 6kg cylinder is Ksh.1,560.

On Waiyaki Way at Shell Mountain View, the 13kg cylinder is Ksh.3,350 and the cost of the 6kg cylinder is Ksh.1,560. At Total South B., the same prices are replicated.

Independent LPG traders on Waiyaki Way sell the 6kg cylinder at Ksh.1,400 and the 13Kg cylinder at Ksh.2900.

Data from the Kenya National Bureau of Statistics derived from the 2019 census shows that 53 percent of homes in urban centers rely on LPG for cooking compared to 5.6 percent of rural households.

The local LPG situation is already eating a deep hole into the pockets of low-income earners whose energy and food prices take the largest proportion of their income.

LPG is slowly getting out of range for many households, as a country, we could reverse the gains made in curbing respiratory diseases and environmental degradation if we remain indifferent.

The lack of clean and affordable energy alternatives is likely to spark demand for charcoal among low-income households at a time the world is frantically trying to boost the uptake of clean energy.

The FY2022/2023 Budget Policy Statement indicates that Treasury expects to fund the supply of at least 300,000 cylinders. This is, however, only a small percentage of the target of four million that was outlined in the initial plan.

Kenya’s LPG business is mainly in the hands of independent LPG traders and the big international oil marketers e.g. Vivo (Shell), Total, Rubis and Oil Libya, and Africa Gas and Oil (AGOL) among others; it remains to be seen how the government is going to balance between gainful private sector investment and shielding its vulnerable population who badly need to use clean energy sources.

The government should take note that LPG use hit a new high of 373,865 tons in 2021, up from 320,909 in 2020, despite the higher cost of the commodity. Households are ready and willing to use LPG energy if only the government would have a robust plan to ensure its affordability and availability.

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