Fuel prices set for fresh rise on increased railway levy

The cost of fuel is set for a fresh rise should a proposal by the government to increase the Railway Development Levy (RDL) on imports be implemented.

RDL is one of 9 taxes and levies that the government charges on fuel. It is charged at 1.5% of the value of all imports in the country, including refined oil and cooking gas.

Kenya imports all its refined oil and cooking gas, mainly from the Middle East, particularly the United Arab Emirates (UAE) and Saudi Arabia.

National Treasury Cabinet Secretary John Mbadi has proposed to increase the levy to 2.5% from the current 1.5%.

In the current October – November fuel pricing cycle, RDL is charged at Ksh1.19 per liter of petrol and diesel and Ksh1.17 per liter on kerosene.

Raising the RDL will make the cost of fuel way more expensive than it already currently is.

This will be translated to other sectors that rely on fuel such as transport, aviation, manufacturing, agriculture among others.

The proposal for a higher RDL is through the draft Tax Laws (Amendment) Bill, 2024 that the Treasury has published to collect the views of the public on the proposed changes in tax laws.

Under the Miscellaneous Fees and Levies Act, the Bill has proposed to increase the Railway Development Levy from 1.5% to 2.5%

treasury cabinet secretary john mbadi

The increase of the levy is one of the proposals that were contained in the ill-fated Finance Bill, 2024 that the Treasury is seeking to revive.

The proposal was first introduced in the abandoned Finance Bill, 2024 by the National Assembly’s Departmental Committee on Finance and Planning in its report to the House on the Bill.

The abandoned Bill had proposed far-reaching tax measures that were aimed at raising Ksh344.3 billion in additional tax revenue.

The Committee argued that the additional revenue that will be raised from the levy will be used to develop an electric light rail system in Nairobi.

The RDL was introduced in the 2013 budget by then Treasury Cabinet Secretary Henry Rotich who said that the fees collected would be used to help fund the construction of the Standard Gauge Railway (SGR) from Mombasa to Kisumu.

The proposal to raise the RDL will disproportionately affect products such as fuel which are already heavily taxed.

Value Added Tax (VAT), excise duty, Road Maintenance Levy (RML) and Anti-adulteration levy are also charged on the product.

Other taxes incurred on the product are Merchant Shipping Levy, Petroleum Regulatory Levy and Import Declaration Fee.

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