The Kenya Roads Board (KRB) revealed that it considered charging the Road Maintenance Levy (RML) in dollars before adopting the Ksh7 increase.
In its review of the levy, which is charged for every litre of fuel bought by motorists, the board noted that the proposal was dropped owing to two factors.
Among the reasons was the fluctuating exchange rate which has been changing since the start of the year. In January the dollar exchanged above Ksh160. However, the dollar is currently exchanging at Ksh128.
Therefore, the board explained that the fluctuations would affect the collections done for the kitty meant for road maintenance.
"The Fuel Levy rate could be set in US Dollars. This means that if the levy was pegged at US Dollar rates at, say 15 cents a litre then it would translate to Ksh13 today. This would result in an annual RMLF collection of Ksh103.1 billion.
"Pegging the Fuel Levy rate on the US Dollar would have the effect of cushioning the RMLF against fluctuations in foreign currency exchange rates. The disadvantage of this form of taxation is that it will fluctuate as the USD exchange rate changes," he stated.
Additionally, owing to the fluctuating exchange rate, the board expressed that it would have been forced to review the levy charged every month during the pump reviews.
"This will also entail the review of pump prices at every price review period for purposes of cost recovery," the board added.
Therefore, owing to the disadvantages, the board settled on charging the RML at a specific rate.
In the proposal, the board is seeking to have the levy increased from the current Ksh18 to Ksh25.
Through the Ksh7 increase, the board is targeting to collect more funds to maintain a number of pending road projects. Currently, the government collects Ksh80 million annually for the levy.
"In light of the current economic conditions, it is proposed to increase the RMLF rate to Ksh25 per litre of petrol and diesel. The annual RMLF revenue will increase to Ksh115 billion, assuming all other factors remain constant.
"Consideration may be given to imposing a two-tier system, whereby the RMLF rate on petrol varies from that on diesel, noting that these two products serve varying purposes," the board detailed.
