Fuel shortage looms in parts of the country after independent petroleum suppliers began an indefinite strike, demanding the National Treasury to reverse the unpopular 16 per cent value added tax (VAT) on petroleum products.
There was pandemonium across the country as cost of fuel rose by about 12 per cent at the pump, angering Kenyans who complained of an increase in the cost of living.
Such shortages are usually followed by hiking of the cost of fuel. Under their umbrella body Kenya Independent Petroleum Dealers Association (Kipeda), the fuel distributors and retailers vowed to resume services only when the government suspends the levy.
“Today, we have downed our tools until the government suspends levy it has imposed on us,” said Kipeda chairman Joseph Karanja, who was speaking at Nairobi’s Lunga Lunga depot where he also addressed more than 1,000 fuel tanker drivers and retailers.
The strike will mainly cut petroleum supply from rural gas stations as they comprise the majority membership to Kipeda.
“This is in solidarity with all other Kenyans against the government’s decision,” said Karanja, adding that members of the association control 55 per cent of the retail market. However, industry data by the Petroleum Institute of East Africa says they control about 25 per cent.
They urged top petroleum companies to join them and push Treasury to scrap off VAT.
At the Kenya Pipeline Company depot in Eldoret, operations came to a standstill as truck drivers were barred from accessing the premises.
More than 200 oil tankers which had arrived at the depot to load fuel products destined for various parts of the North Rift, Western Kenya regions and neighbouring countries were barred from accessing the depot amid tight security.
Petroleum product shippers have said they will not clear any order to suppliers until the government explains the price hike.
Shippers of petroleum products in the region have resolved not to give out any orders to their customers owing to confusion surrounding the pricing of petrol, diesel and kerosene.
Led by Gulf Energy regional manager Ronald Kipkemboi, they said they were at a loss as who will bear the cost between suppliers and petrol station owners.
Commuters started feeling the pinch when Public Service Vehicles (PSVs) increased fares during a meeting of matatu saccos chairpersons in Nairobi.
Although some PSVs had already increased fares from Sunday, it is now official that town service PSVs will hike fares by Sh20 while long distance ones will increase fare by 20 per cent of their current charge. Addressing the meeting attended by 50 chairpersons of various, Matatu Welfare Association Dickson Mbugua said they had three options to explore; seek legal redress, hike fares or call a nationwide strike.
Since the 16 per cent VAT had already been effected they decided on the last two options.
Commuters will now be forced to pay up to Sh100 during peak hours along Mombasa Road from Sh80, Sh120 on PSVs plying the Thika-Nairobi route and those travelling to Rongai will now have pay at least Sh150 during peak hours.
PSVs destined to Kakamega, Bungoma and Kisumu will charge between Sh1,000 and Sh1,200 with those travelling to Eldoret paying Sh1,000 up from Sh800. Those travelling to Mombasa will pay at least Sh1,800 henceforth.
In Nakuru matatus, taxis and boda boda operators thronged the streets and barricaded several roads in the town demanding the revocation of the levy.
Led by the matatu operators chairman Abdul Noor, the operators called for immediate resignation of Treasury cabinet secretary Henry Rotich over his defiance against the National Assembly’s directive to temporarily halt the introduction of new taxes.
On the other hand, Mombasa governor Hassan Joho asked President Uhuru Kenyatta to assent to the Finance Amendment Bill 2018 that suspends the implementation of the tax.
“The tax will increase the cost of goods. Our people are already overburdened by difficult economic circumstances like low income, unemployment and inflation,” he said in a statement yesterday.
Central Organisation of Trade Unions boss Francis Atwoli said they had moved to court over the increased cost of fuel.
He asked the president to intervene.
“Everything will grind to a halt if the high cost of the fuel is not reversed,” he added.
Activist Okiya Omtatah also moved to court seeking to stop the VAT levy on Petroleum products.
He sued the Treasury CS, Kenya Revenue Authority commissioner general John Njiraini and the Energy Regulations Commission terming the move unconstitutional given its cascading negative impact on the cost of essential goods.
According to him, the impugned imposition of VAT on petroleum products threatens the economic wellbeing of the population.
“The application is not only extremely urgent but it also raises weighty constitutional issues of great public interest,” he said in the documents.
Omtatah also argues the imposition of VAT on petroleum products violates express provisions of the Constitution including public participation, reasonableness, the threshold for limiting rights, the advancement of socio-economic rights and the right to property.
The VAT Bill was published by the government in 2013 with the objective of raising taxes. It was, however, put on hold in 2016 for the express reason that it could trigger an economic crisis.
The National Assembly passed an amendment to the finance Bill 2018 on Thursday extending the exemption on petroleum products for a further two years until September 1, 2020.
However the Treasury CS argued that the president had not signed the amendment and insisted on implementing the VAT on petroleum products.