21 February 2018

Kenya: Heavy Taxes Raise Kenya's Petrol Prices Above Tanzania's

Heavy taxation has left Kenyan motorists paying higher fuel prices compared with their Tanzanian counterparts, the latest industry data shows.

Kenya's pump prices are set to rise even further as the Treasury moves to impose a delayed 16 per cent value added tax on petroleum later this year.

Kenya and Tanzania both have petroleum price controls and import the products through their respective seaports - Mombasa and Dar es Salaam.

Latest data from the two countries' energy regulators indicate that Kenyan motorists are paying at least Ksh4.50 ($0.04) more for a litre of petrol at prevailing exchange rates.

Transport costs

Petroleum prices vary across Kenya and Tanzania due to transport costs that reflect how far a location is from the seaports where imported consignments land and are stored.

In Kenya, Mombasa consumers pay the lowest fuel prices at Ksh104.63 ($1) per litre of petrol and Ksh93.68 ($0.92) for diesel following last week's price adjustments.

This is, however, Ksh4.50 ($0.04) more than the Tsh2,226 ($0.98) that Dar motorists pay per litre of petrol, according to data from Energy and Water Utilities Regulatory Authority (Ewura) -- Tanzania's sector regulator.

Diesel costs Tsh2,065 ($0.90) per litre or about one shilling less than comparative Kenyan prices.

In Kenya, petrol is most expensive in the northeastern town of Mandera where motorists are paying Ksh121.73 ($1.20) a litre, or Ksh17 ($0.17) more than in port city of Mombasa. This is, however, far much higher than the Tsh2,469 ($1.08) that motorists in Tanzania's far-flung western town of Uvinza are paying.


Fuel is one of the most heavily taxed commodities in Kenya.

Taxes and levies account for up to Ksh39.16 ($0.39) per litre of petrol while the government takes Ksh29.57 ($0.29) from every litre of diesel sold at the pump.

Further, petroleum products are set to start attracting valued added tax (VAT) from September at the rate of 16 per cent.

September marks the expiry of a two-year exemption of VAT on fuel products, setting consumers up for even higher fuel prices from the current 40-month high level.

Kenya's Treasury secretary Henry Rotich in September 2016 deferred imposition of VAT on fuel by two years through the Finance Act 2016.

VAT on petrol, diesel and jet fuel was introduced in the VAT Act in 2013, with a three-year grace period that would have seen it come into force in 2016 but was deferred yet again to September 2018.

"The exemption shall be extended by a further two years from September 1, 2016," the Act says.

Mr Rotich did not respond to phone calls and text messages on the impending tax burden on motorists.

Pump prices

A comparison of pump prices in Kenya and Tanzanian capitals shows that motorists in Nairobi are paying Ksh5 ($0.05) higher for a litre of petrol and Ksh1.50 ($0.01) more for diesel compared to Dodoma.

In Nairobi, about 500 kilometres from Mombasa seaport, petrol is currently retailing at Ksh107.92 ($1.07) while diesel is priced at Ksh96.96 ($0.96).

In Dodoma, petrol costs less at Tsh2,285 ($1.01) while diesel is priced at Tsh2,123 ($0.93).

In 2014, Kenya's fuel prices were the lowest in East Africa but that has changed over time with the build-up of taxes and levies.

In the period, the government has more than doubled the road maintenance levy charged on each litre of petrol and diesel to Ksh18 ($0.18).

Petrol is taxed more compared to diesel as part of the government's policy to encourage productive use of fuel.

Excise duty on petrol is Ksh19.89 ($0.20) a litre while the levy on diesel is Ksh10.3 ($0.10) per litre, explaining the price difference.

Ugandan petroleum retail market, which gets its supplies through Mombasa and Dar, is not controlled and is left to market forces with petrol costing at least Ksh3 ($0.03) more per litre than Kenya's.


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