Why Ruto’s Promise of Cheap Cooking Gas Remains Hot Air

In March,2023, President William Ruto promised to lower the price of cooking gas otherwise known as Liquid Petroleum Gas.

He declared that he would direct for the removal of taxes imposed to make the gas affordable for Kenyans.

“Prices of gas will go down after we scrap off the taxes imposed on them,” he stated. 

However, the promise remains unfulfilled, months later.

Notably, he promised that by June 2023, cooking gas cylinders would retail at Ksh300 or Ksh500.

However, in May 2023, President Ruto stated that lowering cooking gas prices would not be possible without the Finance Act, 2023.

Also Read: Ruto Says 6kg Cylinder of Cooking Gas to Cost Ksh 500 by June

“We are only lowering the price of cooking gas cylinders to between Ksh 300 and Ksh 500 before you refill gas,” President Ruto clarified then.

“It will not be possible to reduce gas prices by June. This must first be approved in the Finance Bill 2023. If we had fixed this in the supplementary budget, then June 1 would have been the ultimate,” he added.

Promises of Cheap Cooking Gas to Kenyans

The Finance Act 2023, zero rated the Value Added Tax (VAT) on cooking gas, envisioning much lower prices.

Moreover, the bill proposed an increase in VAT of petroleum products to 16% from 8%, pushing the prices of petrol, diesel, and kerosene through the roof. 

Consequently, the president said the new tax collected on kerosene would be used to subsidize cooking gas cylinder prices.

“We will use levies collected from kerosene to securitize and reduce the cost of cooking gas cylinders,” he stated on the matter.

However, despite the passing of the finance bill, President Ruto’s promises on the price of cooking gas remains hot air – nothing much has changed. 

As of October 12, 2023, Kenyans who use LPG for cooking spend an average of Ksh1,300 to refill a 6kg cylinder.

Why are the Prices of Gas Still High?

According to Kenya National Bureau of Statistics (KNBS), Kenyans were refilling 13kg cylinder at Ksh3,106 in September 2022 and Ksh2,795 in September 2023, which signifies a drop of about 10 percent.

The major driver of cooking gas prices in Kenya is the lack of regulation on retail prices for LPG.

With the lack of regulation of cooking gas prices, the cost of LPG remains out of reach for most households in Kenya.

This is despite favorable taxation policy and equipment subsidies.

Moreover, regulation of cooking gas prices is aimed at stabilizing the prices, which might see cooking gas prices going down.

Of note, is that the rising prices of fuel products directly affect the prices of LPG.

“The cooking Gas is extracted from petroleum products, which is why it is called LPG (Liquid Petroleum Gas). It is a product of petroleum so, when the price of petroleum products goes up, the gas goes up,” Polycarp Ngoje, a financial economist told The Kenya Times. 

He also pointed out the depreciating shilling, which has been in a free fall for most of this year.

“On the other hand, we import petroleum products, when the shilling weakens, the cost of our imported products equally goes up. So, being a net importer, all these combinations affect our retail consumer product,” Ngoje added.

The shilling currently sells at Ksh 149 per dollar, the highest it has been in history. 

Professor Fred Ogolla, the leader of operation Linda Jamii echoed Polycarp Ngoje’s remarks on the impacts of the weakening Kenyan shilling.

“Depreciation of the Kenya shilling against the dollar has affected us in a big way because it leads to the increase in prices of goods and services,” he said.

What is Being Done to Reduce Cooking Gas Prices?

On October 9, 2023, the cabinet met and discussed ways to reduce cooking gas prices to make it affordable to the common Mwananchi.

“The proposed interventions will further encompass establishing common-user LPG import terminals, distributing subsidized LPG cylinders to low-income households, and promoting LPG use in institutions,” a dispatched from the executive office of the president stated.

Currently, one of the biggest drivers for demand of LPG gas is that it has emerged as a clean and efficient energy source for various industries.

Also Read: Kenyans Warned of Fake Cooking Gas Cylinders

The global market for LPG is being driven by rising environmental concerns.

Notably, LPG has remarkably lower carbon emissions compared to its conventional fossil fuel alternatives.

The cabinet discussed the issue of environmental and health concerns, admitting that LPG will be a big driver towards environmental sustainability.

“These measures aim to reduce consumer prices, improve public safety and contribute to both public health and environmental sustainability,” the cabinet dispatch read in part.

Of note is that the global LPG prices are dropping. This fact breeds hope as the global price drop will consequently affect Kenya’s cooking gas prices.

Additionally, data from Trading Economics shows prices of propane, commonly known as liquefied petroleum gas (LPG), stood at $0.694 (Ksh103) per gallon on Wednesday.

By comparison, this is cheaper than February 2023 where a unit price of LPG sold at $0.9 (Ksh133) in the global market.