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High costs of cooking oil, fuel and power make life unbearable

High costs of cooking oil, fuel and power make life unbearable

Kenyans are increasingly feeling the squeeze of a high cost of living as the prices of basic items get out of reach for many households.

The cost of energy has been on a consistent increase over the years, with Kenyans now paying high prices for electricity and petroleum products.

This has had a ripple effect on other products, with both fuel and electricity being critical to production processes across different industries.

These vary from transportation of inputs to the farm and fresh produce leaving the farms for markets as well as manufacturing of consumer goods.

Thus, other than the high transportation costs and electricity prices, Kenyans also have to pay more for essential items such as maize flour, cooking oil and other food items.

Fuel prices went down sharply last year, albeit momentarily, owing to a drop in demand following restrictions to contain Covid-19.

The trend has since reversed and th prices currently stand at a record high.

Consumers were hit hard this month after the retail prices of petrol rose to unprecedented levels folowing the government’s removal of subsidies that had suppressed local pump prices.

In the prices announced by the Energy and Petroleum Regulatory Authority on september 14, super petrol is retailing at Sh134.72 per litre in Nairobi, a six per cent increase from Sh127.14 that had been in place fro several months.

Diesel is retailing at Sh115.6 per litre, also a sharp increase from Sh107.66. Kerosene, largely a poor man’s fuel for lighting and cooking, increased by Sh12.97 per litre to Sh110.82.

It is the same trend for electricity prices.

In 2016, consumers using about 50 units of electricity (kilowatt hours – kWh) per month spent about Sh530. This has gone up to about Sh900 per month.

Users of 50 units of electricity or less per month are categorised as lifeline consumers and are highly subsidised.

The price of cooking gas has shot up after the government imposed 16 per cent value-added tax (VAT) on the essential fuel.

Liquefied petroleum gas (LPG) is now retailing at about Sh2,500 for a 13-kilogramme cylinder refill. Among some oil marketing companies, the price is as high as Sh2,700.

LPG use had over the last decade gone up on account of a favourable policy environment, which enabled consumers to shift from kerosene and charcoal to cooking gas.

The incentives included comparatively lower taxes compared to other fuels and an exchange pool that eased refilling of cylinders at any LPG retail point.

This is, however, changing with the disbanding of the exchange pool and imposition of VAT.

The situation is set to get worse with the Kenya Revenue Authority set to hike excise tax rates on different commodities beginning October 1.

The inflation-linked excise duty of 4.97 per cent, according to a lobby Stop Crime Kenya (StoCK), spells further bad news for consumers reeling from the recent fuel price increase.

“Kenya’s high taxes are already to blame for the smuggling of a range of goods from neighbouring countries where rates are dramatically lower,” said StoCK chairman Stephen Mutoro.

“The upcoming increases will widen the gap further and boost the profit margins of criminals involved in illicit trade, while stretching the resources of honest, hard-working citizens.”

He said it is irrational to take money from people without stepping up measures to combat the illicit economy, “which robs us of Sh153 billion in tax revenue annually.”

As a result of the upcoming increases, consumers will pay Sh5.77 more for a litre of beer while prices for spirits will rise by up to Sh13.20.

Price of a litre of petrol will rise by Sh1.09, while diesel and kerosene will increase by Sh0.566 per litre.

The lobby said it campaigns against criminals making a fortune smuggling and selling illicit goods and argued that by pushing up excise tax annually, the government plays a role in boosting the rogue players.

“The government should focus on collecting the taxes that are being evaded in the shadow economy,” Mr Mutoro said.

Illicit products put the lives of citizens at risk and destroy legitimate businesses and honest jobs, he added.

“While enriching criminals, they reduce the revenue that government needs to deliver basic services to the poor and vulnerable, such as old-age grants, schools, clinics and a vaccine rollout programme to deal with the Covid-19 pandemic.”

The cost of cooking oil has also significantly gone up on account of more expensive inputs, particularly palm oil.

Earlier this year, a tonne of crude palm oil in the global market cost $600 (Sh65,400). Today it is selling at $1,060 (Sh116,600) per tonne, with an additional $50 (Sh5,450) for shipping.

Industry players note that the last time global prices of palm oil reached this level was 1989.

Kenya Association of Manufacturers (KAM) said local manufacturers have suffered.

“Globally, there is a huge commodity boom and prices of most essential foods and grains have doubled,” a KAM official told The Standard in a recent interview.

“Similarly, soybean and palm oil, which is the main raw material used in the processing of edible oils and is imported from South East Asia.”

The official said prices of edible oils have increased in recent months due to an increase in the price of crude palm oil in the global market.

This has reduced local manufacturers’ competitiveness, thus eating into their local and global markets.