Kenya’s Petroleum Development Levy (PDL) faced a substantial decline in collections, falling by almost Sh1 billion for the fiscal year that concluded in June. The slump can be attributed to reduced consumption of super petrol and diesel, influenced by steadily rising fuel prices. Official data from the Ministry of Energy and Petroleum reports that the Kenya Revenue Authority (KRA) gathered Sh25.2 billion from the PDL, marking a noticeable drop from the Sh26.1 billion collected in the prior year.
The decrease in collections underscores the challenges faced by consumers in the face of costly fuel. During this period, the price per liter of super petrol increased by Sh2 to reach Sh179.30, while diesel experienced an even more significant rise of Sh8, pushing it to Sh 168.40 within the monthly cycle commencing on May 14.
The PDL collections play a crucial role in stabilizing pump prices and shielding consumers from sudden price spikes. However, the decline in collections compelled the government to allocate additional funds from the Exchequer to meet the escalating compensation demands.
To fund these initiatives, the government has been imposing a levy of Sh5.40 for every liter of super petrol and diesel, alongside Sh0.50 per kilogram of liquefied petroleum gas (cooking gas). In an effort to alleviate the pressure on the Exchequer and ensure stable cash flow, the government had completely eliminated the stabilization scheme in May.
The scheme’s introduction initially took place in April 2021 when global fuel prices were on the rise. However, more recently, the government reinstated the use of the PDL kitty to protect consumers from increasing fuel prices during the current monthly cycle, which concluded on September 14.
With the announcement of record-high fuel prices, it is anticipated that collections into the PDL kitty will continue to decline throughout the current financial year. In the most recent cycle, the price of a liter of super petrol reached an unprecedented Sh217.36, marking a Sh5.72 increase. Diesel followed with an increase of Sh4.48, reaching Sh205.47 in Nairobi, while kerosene rose by Sh2.45 to Sh205.06.
The Energy and Petroleum Regulatory Authority (EPRA) warned that, without the stabilization scheme, consumers would face even higher costs. A liter of super petrol would be Sh220.43, diesel would retail at Sh217.11, and kerosene would cost Sh214.66.
As Kenya grapples with the impact of rising fuel costs and a strained fiscal environment, the future of the Petroleum Development Levy remains uncertain, leaving both consumers and the government navigating uncharted waters.
Photo( The Standard)
By Montel Kamau
Serrari Financial Analyst
18th October, 2023
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