In a radical move, to help cut high cost of living in Kenya, a new bid to urgently recall Parliament from recess, Hon. Ndindi Nyoro says. The sole mandate of the recalled session will be to debate and pass a series of far-reaching statutory amendments seeking to aggressively drive down pump prices in Kenya.
The movers of the proposed move want the intervention in form of amendments on specific statutes to avoid more long-term damage caused by the current inflation rates in the country, while setting up the country for an extremely heated fiscal debate over its revenue security.
Key components of the new legislative proposal will target two of the most contested aspects that make up the pump price in Kenya, i.e. Value Added Tax (VAT) and the Road Maintenance Levy Fund (RMLF). Should the Speaker of the National Assembly give his nod to the demand for an extraordinary sitting, a number of interventions would be put on the table for parliamentary approval, starting with the hefty VAT reduction on fuels products.
Fuels product have for a long time been subject to an 8 percent VAT levy and the proposal intends to introduce an amendment on the VAT Act to reduce it to zero percent (0%) on both Super Petrol, Diesel, and Kerosene. The one move alone would save consumers Ksh15.87 on each litre of Super Petrol, and Ksh17.99 on Diesel.
Ndindi Nyoro puts pressure on government over rising fuel costs
the VAT, the proposal seeks to abolish the entire Road Maintenance Levy Fund (Imposition of Levy) Order, 2024, that would see removal of Ksh7.00 per litre on the road fund on both fuels products. Additionally, there will be a proposed Ksh 5 Billion subsidy set aside by the government for Diesel which does not require parliamentary approval and could be enacted by the Ministry of Energy and Petroleum to offer immediate relief as the proposed legislative action continues.
Upon passing of the two statutory amendments by Parliament, consumers stand to enjoy substantial direct savings on fuel costs. Super Petrol, with its VAT and RMLF saved, would drop by a cumulative Ksh22.87 per litre whereas Diesel consumers would stand to gain Ksh 24.99.
The proposal offers potential benefits for consumers, although it poses an even tougher dilemma for Parliament. Advocates of the amendments suggest that since fuels prices are a key driver of supply-side inflation, the price reduction will positively impact production costs for manufactured goods, electricity generation, mechanised farming, transportation, and will lead to a decline in the prices of basic goods such as food, thus allowing citizens to keep more income for their use.
On the contrary, the national treasury has a lot on its plate. The RMLF is designated for infrastructure development via the Kenya Roads Board. Any cut of Ksh 7 per litre on the levy will create a budgetary shortfall in road repair projects. The elimination of the VAT on fuels products removes one of the government’s highest and most reliable sources of income from the KRA, and Parliament would have to find ways to secure a substantial part of this lost income or risk a deeper economic slump and potential default on its debt servicing.
The onus now lies with the Speaker of the National Assembly. The parliamentary Standing Orders demand the creation of a valid justification case before an emergency session of Parliament can be convened. In the event that the motion to recall Parliament sails through, the proposed statutory amendments will then be taken through the usual legislative process, which entails, amongst other, parliamentary committee hearings and debates, though fast-tracked to suit the urgency.
