Why you should care about the LPG tax rise

Universal access to modern energy services by 2030 is one of the three goals of the Sustainable Energy for All (SE4All) initiative launched by the United Nations in 2011. Kenya joined SE4All in 2012. – World Bank

Two weeks ago 200 truck drivers were stranded at the Namanga border over a tax rise on trucks in transit. This caused drivers’ delivery to go to a standstill threatening an LPG (Liquid Petroleum Gas) shortage. Last year, 2021 KRA said that cooking gas will no longer be zero-rated in East Africa’s biggest economy.

At the moment it is said that gas prices will go up from 150 to 300 Kenya shillings, KRA has said that levies on LPG would rise from $605 per ton to $930 per ton. The 29-day standoff of trucks at the Namanga border has also seen a 2000 Kenya shilling cess levy by the county of Kajiado for every truck passing through the county.

This bids the question, with rising taxes which may, in turn, affect the price of LPG in the retail and wholesale market, will Kenya meet its 2030 goal in time? Factors such as COVID-19 and the Ukrainian-Russian conflict have affected many different industries including that LPG.

With only 8% of Kenya’s gas obtained from neighboring country Tanzania and the rest pulled from Mombasa port from a privately owned pipeline, Kenya has found itself in a quest to find a way to be self-dependent when it comes to LPG provision, to meet the 2030 goal.

A stocktaking revealed that Kenyans relied predominantly on traditional sources of cooking energy. About 84 percent of the population cooked with solid fuels (wood, charcoal, or agricultural residue), and 5 percent used kerosene. . Cooking with these fuels affects the health of millions of Kenyans while causing environmental and social damage. An estimated 15,000 Kenyans die each year from air pollution, and at least 40 percent of childhood deaths are caused by a respiratory illness. – World Bank.

That said, the move to gas makes sense environmentally, but is the economy stable enough to even begin this process? There must be an honest assessment in the LPG industry where resources that Kenya can offer itself, a unanimous strategy and way forward in terms of taxes and administration, that direction can be sorted after with more intention. Why all this is important, is because these tax hikes and standoffs affect the end consumer, and the story ends in more economic oppression.



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