The Budgets and Appropriations Committee of the National Assembly have recommended an extra Sh5 billion allocation to stabilize prices of fuel.
According to the committee, the allocation will supplement collections through the Petroleum Development Levy (PDL) that is charged at Sh5.40 on each litre of petrol and diesel sold at the pump.
“The Department (Petroleum) will receive an additional Sh5 billion in the 2022 BPS (Budget Policy Statement) that will cater for oil market price stabilization,” the committee said in recommendation.
The committee, however, recommends the restructuring of the subsidy scheme to ensure efficiency in the management of the funds.
“The implementation of the fuel subsidy is hampered by a lack of the board to administer the Petroleum Development Levy Fund and the uncertainty of the fund as a fuel stabilization measure in the long-term,” the committee said.
This comes when Kenyans are staring at tough times after the government revealed the fuel subsidy kitty is running on empty and is left with only a fraction of what is needed to cushion them from a historic increase in fuel prices next month.
Ministry of Petroleum Principal Secretary Andrew Kamau told Members of Parliament on Tuesday that the PDLF that the state draws from to compensate oil marketing companies has only Sh1.2 billion left as at February 11.
Kamau further told MPs that the Sh24.73 billion the Ministry has allocated to keep fuel prices stable in the supplementary budget is not a fresh allocation as it was allocated in June and has already been spent.
The PS was appearing before the National Assembly’s Committee on Energy over the supplementary budget estimates for the fiscal year 2021/22 submitted to Parliament by National Treasury Cabinet Secretary Ukur Yatani last month.
The Ministry requires between Sh5 billion and Sh8 billion monthly for the fuel subsidy depending on the volume of fuel consumed by Kenyans each month, which is multiple times what is left in the kitty.
This means unless the Ministry is allocated extra billions in the mini budget, the government will be forced to abandon the subsidy which will see consumers pay a record high for fuel at the pump.
He said collections into the subsidy kitty are not enough, which could make its use to stabilize fuel prices unsustainable notwithstanding the sharp increases in global crude oil prices.
“What is left in the January-February cycle is Sh1.2 billion,” the PS told MPs. The PS told the committee that since its inception in 2018, a total of Sh55.7 billion has been collected.
According to the breakdown given by the PS, in the financial year 2018/2019, Sh5 billion was collected into the fund, dropping to Sh4.22 billion in the financial year 2019/2020. However, collections into the PDLF multiplied to Sh26.5 billion in the financial year 2020/2021after the levy was raised by Sh5 per litre to Sh5.40 on petrol and diesel up from Sh0.40 per litre.
Kamau said the Kenya Revenue Authority (KRA) has so far collected Sh19.17 billion into the fund in the 2021/2022 financial year. However, the PS told the committee as at February 11 this year, only Sh1.2 billion remains in the account even as the government on Monday announced it will use the subsidy for the fifth month.
“The low collection of PDL is still a challenge in controlling fuel prices,” said the PS when asked whether the amount collected is sustainable for the stability of fuel prices in the long term. To illustrate what could befall consumers should the subsidy be discontinued, the Energy and Petroleum Regulatory Authority (Epra) on Monday said petrol prices would have increased by Sh14.53 per litre had the subsidy not been applied, a record high, which would have seen it retail at Sh144.25 per litre at the pump.