Lawmakers have moved to avert a looming economic crisis by adding the Ministry of Petroleum and Mining Sh15 billion to fund the fuel subsidy programme.
In a supplementary budget two considered by the National Assembly, the Budget and Appropriations Committee added the amount to the Sh5.1 billion it has allocated for fuel subsidy bringing the cumulative figure to Sh20.5 billion.
The aim of the programme is to prevent fuel prices from rising beyond levels that would worsen inflation.
However, the amount had been slashed by 84 per cent from Sh31.7 billion, with MPs on Monday complaining that it would trigger an economic crisis. Committee Chairman Kanini Kega Tuesday said this was to cushion Kenyans against the high cost of living.
In a proposed amendment to the Appropriation Bill 2022, the committee proposed a Sh15.36 billion increase in the allocation to the fuel subsidy programme.
Currently, taxes on fuel constitute up to 41 per cent of the cost, with a litre of petrol that’s going for Sh150.12 constituting Sh61.87 in taxes and levies, while a litre of diesel costs Sh131 having Sh50.32 in taxes and levies.
Funding for the fuel subsidy is raised through the Petroleum Development Levy, where consumers pay Sh5.40 per litre of petrol they buy at the pump after it was increased from Sh0.40 per litre last year. While current fuel prices in Nairobi are Sh150.12 (petrol) and Sh131 (diesel), without the subsidy, consumers would be paying up to Sh176 per litre of petrol and Sh175 for diesel, thus absorbing between 15 and 25 per cent of the price shocks to protect consumers.
The Budget Committee however warned that the Sh5.1 billion allocated for the next budget would be depleted within three months, exposing the economy to huge fuel prices that would raise inflation.
“It is projected that the crude oil prices are unlikely to reduce due to the ongoing Ukraine-Russia conflict, the department may end up exhausting the Sh5 billion provided for the fuel subsidisation programme in the first quarter,” the committee warned.