President William Ruto's administration has reintroduced the fuel subsidy programme in the latest review of August - September pump prices.
The subsidies were undertaken during former President Uhuru Kenyatta's regime as a means of cushioning Kenyans from high fuel prices and moderating the cost of basic food items.
According to the Energy and Petroleum Regulatory Authority (EPRA), the subsidy was reintroduced to cushion Kenyans from the impacts of increased fuel landing costs.
It was indicated that the landing cost of Super Petrol increased by 6.84 per cent in the last month. Landing costs of Diesel and Kerosene on the other hand increased by 4.29 and 7.41 per cent respectively.
With the return of the subsidy, August fuel prices remained unchanged.
How Prices Would Look Like Without Subsidy
In EPRA's actual calculations, a litre of Super Petrol was to retail at Ksh202.01 - an increase of Ksh7.33 from the current Ksh194.68.
Diesel, on the other hand, was to increase by Ksh3.59 from the current Ksh183.26.
Kerosene was also to hit the Ksh175.22 mark from the current Ksh169.48 - an increase of Ksh5.74.
Cost of Living
Had the government failed to implement the subsidy, the prices of basic commodities such as maize flour, sugar and cooking oil among other commodities would have shot up.
An increase in fuel prices leads to a hike in transportation costs which is automatically passed down to the consumers.
Already the Central Bank of Kenya (CBK) in its July Agriculture Survey Report indicated that a number of household items such as onions would increase in prices following poor harvests in the country and Tanzania. Currently, a medium size onion is being sold between Ksh15 - Ksh20.
If the subsidy was not implemented then the price would have gone beyond the Ksh20 mark owing to an increase in transportation costs.
Other household items set to increase in the month include sugar, cooking oil and eggs.
The IMF Factor
The International Monetary Fund (IMF) has been one of the biggest institutions pushing for the removal of subsidies. Notably, the subsidies were scrapped by Ruto two days after his inauguration in office.
The president explained that the programme by his successor was unsustainable as it only benefitted a few importers. Ruto also claimed that the programme had been mismanaged with the funds uncounted for.
However, Kenyans.co.ke has established that the country still has leeway for the programme despite a push by the IMF. In the fifth review of the country in July, Treasury indicated that the subsidies will be completely scrapped by the end of August.
"A taskforce to review the fuel pricing mechanism and ensure that fuel prices are at all times aligned to the approved budget has been constituted and its findings will be publicly communicated in August 2023," read the IMF report.
Opposition Pressure
Had the Ruto administration failed to implement the subsidy programme, he would have given his arch-rival Raila Odinga political fodder in his campaign against the government.
The opposition has already held nationwide protests against the government over the cost of living in July. These protests have paralysed activities in parts of the country.
Notable, the high cost of living is one of the agendas for talks being led by Wiper leader Kalonzo Musyoka and National Assembly leader of Majority Kimani Ichung'wah.
Hustler Factor
Despite promising to reduce the cost of living during the campaigns, Ruto has been accused of reneging on his pledge with key commodities such as fuel increasing since he took over office.
The high cost of fuel had also driven the cost of other commodities to go up. Should have the prices of the goods gone higher, then he would have lost touch with his support base.
According to a TIFA poll released last month, only 30.8 per cent of Kenyans believe Ruto has fulfilled his campaign promises. The majority of Kenyans feel that the current administration has failed to address the high cost of living and unemployment.
EPRA's Stand
EPRA's Daniel Kiptoo has however clarified that the utilisation of the Petroleum Development Levy is not a subsidy but a move to stabilise fuel prices.
“What has been applied is stabilization, not a subsidy. The petroleum development levy was put in place to amongst other things cushion Kenyans from spikes in petroleum pump prices,” he stated.
“We have not applied any exchequer funding which would be a subsidy but simply given back to Kenyans their money which we have collected from them in the past.”
