Road levy hike sets Ruto up for fight with Gen Z on cost of living

The government has gone back on its word that it would not hike the road maintenance and increased it by Sh7 per litre of diesel and super petrol.

The hike in the levy, which the Transport Ministry had just last week assured Kenyans would not happen following public outcry, will increase to Sh25 per litre of the two products that are heavily used in transportation, agriculture, manufacturing and other sectors. 

This is expected to set the stage for another fight by Kenyans with President William Ruto. Kenyans have in recent weeks protested planned hikes in taxes as well as called for increased transparency, compelling Dr Ruto to withdraw the Finance Bill 2024 and dismiss his cabinet secretaries as he sought to calm the country. 

In what could erode the moves by the President, the Energy and Petroleum Regulatory Authority (Epra) on Sunday announced new pump prices and indicated that the Road Maintenance Levy had been reviewed up to Sh25 up from Sh18 per litre of diesel and petrol.

Casting doubts

As was the case with the Finance Bill 2024, Kenyans are now casting doubts as to whether the State considered the overwhelming rejection of the hike in the road levy by Kenyans.

Its increment is also coming a week after the Ministry and the Kenya Roads Board conducted public participation forums on the Bill.

During one of the forums in Nairobi, former Transport CS Kipchumba Murkomen told Kenyans the government would look for alternatives to raise funds for road maintenance.

Despite the hike in the road levy, Epra was able to reduce the pump price by reintroducing subsidies, which the Kenya Kwanza administration has since taking power in September 2022 vehemently opposed.

Over time, the administration removed subsidies across the three petroleum products, only occasionally reintroducing them to prevent sharp spikes in retail prices and reduce the public outcry that has come with increments in the cost of fuel.

In the price capping guide for the July 15 to August 14 cycle, Epra reduced the price of petrol by Sh1 to Sh188.84 per litre in Nairobi, enjoying a Sh3.35 per litre subsidy. Diesel will retail at Sh171.60 per litre in Nairobi, a drop of Sh1.50. Diesel has been subsidised by Sh2.50. Kerosene will go down to Sh161.75, a reduction of Sh1.30 and enjoying a subsidy of 92 cents. 

The lowering of retail prices was also on account of lower landed costs, largely attributed to the continued strengthening of the local currency against the US dollar. 

The new levy rate will increase the share of taxes as a fraction of retail prices, further strengthening the thinking among Kenyans that fuel is heavily taxed. 

At Sh82.74, taxes and levies now account for 44 per cent of the pump price of super petrol at Sh188.84. It is the same case of diesel where taxes now account for 40 per cent, at Sh69.61 of the Sh171.60 per litre retail cost. 

The levy has nearly tripled over the last 15 years, from Sh9 per litre in 2009 to Sh12 in 2012 and Sh18 in 2016. Among the factors that the Ministry cited for its proposals to hike the levy include a 50 per cent increase in the cost of road maintenance since 2016, an expanded road network and a lack of funding for the maintenance of roads assigned to the Kenya Rural Roads Authority (Kerra).

Hiking the road levy was initially recommended as a trade-off for dropping the 2.5 per cent motor vehicle tax that had been proposed in the Finance Bill 2024.

In proposing a higher levy, the Kenya Roads Board – which administers it – had noted that the current collections at Sh84 billion per year are not adequate to meet annual road maintenance requirements at Sh150 billion. 

“RMLF collections at the current rate of Sh18 per litre have stagnated at Sh80 billion per year. However, the road network has deteriorated over the years due to ageing, orphaned road networks, increased urbanisation, traffic and the effects of climate change. The macroeconomic factors such as inflation and devaluation of the Kenya shilling have also continued to pile pressure on the funds for road maintenance. These factors have resulted in a maintenance backlog of Sh724 billion,” said KRB when it made a case for the increase of the levy, adding that it will seek further increase in the levy.

“Based on the annual maintenance requirement of Sh157 billion, the ideal fuel levy rate ought to be set at Sh34 per litre. However, due to the prevailing economic conditions, a phased approach is proposed starting with an increase from Sh18 to Sh28.”