The government has committed to pay marketers an estimated Sh14.39 billion in the subsidy scheme that prevented prices from hitting a record Sh173.70 per litre.
The marketers will receive a compensation of Sh9.02 billion from a subsidy of Sh40.24 per litre of diesel, Sh5.057 billion from Sh29.08 per litre of petrol, and Sh310.87 million for kerosene.
A litre of petrol rose to Sh144.62 while that of diesel increased to Sh125.50 in Nairobi effective Thursday with the subsidy preventing prices from soaring to Sh173.70 and Sh165.74 respectively.
These are the highest fuel prices in the history of Kenya and are set to increase the cost of living given that diesel is a key determinant of the basket of goods and services used to measure inflation.
Producers of services such as electricity and manufactured goods are also expected to factor in the higher cost of petroleum.
The economy also uses diesel for transportation, power generation and running of agricultural machinery such as tractors, with a direct impact on the cost of farm produce. The subsidy has come under increased pressure as the State struggles to compensate for the high deltas amid the global rally in crude prices.
“The government will continue with the fuel stabilisation so as to ensure that Kenya remains by far the cheapest country in East Africa and within sub-Saharan Africa,” Energy Cabinet Secretary Monicah Juma said on Thursday.
The estimated compensation in the current pricing review is the highest in a monthly review since Kenya started subsidising fuel prices and looks set to pile more pressure on the fuel subsidy scheme.
The subsidy is supported by the Petroleum Development Levy which was increased to Sh5.40 a litre of petrol and diesel from Sh0.40 in 2020.
It is meant to protect consumers from volatility in fuel prices but has also seen motorists lose out when paying the Sh5.40 for a litre at the pump.
Kenya is lagging in the compensation with oil marketers saying they are owed in excess of Sh20 billion but the government quotes the figure at Sh13 billion.
Petroleum Principal Secretary Andrew Kamau on Thursday said the Treasury released an undisclosed amount of money to pay the marketers and reduce the arrears.
Last week the State paid marketers Sh8.2 billion to ease a cash