Kenya, a non-hydrocarbon producing country, is tinkering with the subsidy initiative, to cushion effects on motorists whenever there is a high spike in the cost of petroleum products.

A subsidiary legislation, currently under review in the country’s parliament, grants powers to the Petroleum Cabinet secretary to pump in money from a subsidy fund to product suppliers to cut fuel prices and cushion motorists from sharp spikes

The subsidy will be supported by money that will be raised from fuel consumers through the Petroleum Development Levy, which was increased in mid July 2020 to $0.05 (or Sh5.40) a litre of fuel from $0.0036 (Sh0.40), a 1,250% rise.

“The Cabinet Secretary may by writing to the administrator, request for a draw down from the Petroleum Development Levy Fund to stabilise local petroleum prices where he deems necessary,” the Legislation says.

So, in a way, the subsidy is not coming from the treasury, rather, from funds that motorists themselves have contributed. This is the difference with the fuel subsidies in Egypt and Nigeria.

Fuel prices I Kenya ratcheted up to a 13 year high as the surge in Petroleum Development Levy, coalesced with increase in crude oil prices.

From mid-July, Motorists in Nairobi started paying $0.85 (Sh91.87) per litre of diesel from $0.69 (Sh74.57, representing a $0.16 (Sh17.30) increase, and $0.105 (Sh11.38) more for a litre of super petrol at $0.92 (Sh100.48)..

The Cabinet Secretary (Kenya’s title for minister) will determine the amount of subsidy fuel consumers will be offered when prices rise by large margins.

 

Source: Africa Oil + Gas Report

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