Kenya Roads Board wants to double fuel tax to raise $4.28b

Saturday May 9 2015

Kenya Roads Board wants more money for the country’s roads. PHOTO | JARED NYATAYA

Kenya Roads Board wants more money for the country’s roads. PHOTO | JARED NYATAYA NATION MEDIA GROUP

By JEFF OTIENO, The EastAfrican

Kenya needs more than Ksh400 billion ($4.28 billion) to clear the current road maintenance backlog blamed for some of the inefficiencies in the transport sector in the region.

According to Kenya Roads Board (KRB) public relations officer Rosemary Wangui, the country needs a further Ksh50 billion ($535.2 million) every year for routine repairs.

The objective of the board, under the Annual Public Roads Programme (APRP), is to undertake routine maintenance on 41,341km, periodic maintenance on 1,998km and spot improvement on 9,572km of roads throughout the country, hence the urgent need for extra funding.

However, due to the current limitation of funds, the road maintenance programme only covers a third of the existing network.

Kenya’s road network — which has deteriorated in recent years due to poor workmanship and lack of maintenance — and bureaucracy at the East African Community’s ports of entry, have partly contributed to high road freight transport costs in the region.

According to the Kenya Shippers Council, it costs 60-70 per cent more to transport goods in the region than in the US and Europe.

Most affected by the high transport costs are the landlocked countries of Uganda, Rwanda and Burundi, whose traders have to pay extra for goods transported from Mombasa and Dar es Salaam ports, given the fact that road is still the predominant mode transport.

The Ksh400 billion ($4.28 billion), if made available, would also be used to rehabilitate sections of the Northern Corridor that links Uganda, Rwanda and Burundi with Kenya’s Mombasa port.

“All classes of roads whether highway, rural or urban have a maintenance backlog. However, the majority of paved class D and E roads require relatively more funds for rehabilitation before they are placed under a maintenance regime,” said Ms Wangui.

Currently, according to Ms Wangui, the road maintenance levy fund, which is the main source of funding for rehabilitation of roads in the country, only collects Ksh28 billion ($299.7 million) annually, leaving a deficit of Ksh22 billion ($235.4 million).

As a result, KRB is proposing the doubling of the fuel levy, a user charge on petrol and diesel, which currently stands at Ksh9 ($0.096) per litre, to bridge the maintenance gap.

KRB has already written to the Treasury proposing Ksh6 per litre (0.064) tax on diesel and petrol as a road annuity levy and an additional Ksh3 per litre ($0.032) tax towards fuel levy. The proposal, which KRB wants implemented in the next financial year that begins in July, will effectively double charges to Ksh18 per litre ($0.193).

If the proposal is accepted, motorists will have to brace for higher fuel prices, which may raise the prices of goods and services, given the fact that fuel is a major input in the production process. KRB, however, insists that the response to its proposal has so far been positive given the poor state of the roads.

In the current 2014/2015 financial year, KRB is expected to collect Ksh25.33 billion ($271.1 million), a slight increase from the Ksh25.17 billion ($269.5 million) collected in 2013/2014.

The collection for the current financial year is expected to comprise Ksh24.87 billion ($266.2 million) from road maintenance levy and Ksh463.5 million ($4.9 million) from transit tolls.

Apart from increasing the fuel levy, other measures expected to help clear the backlog are public-private partnerships to build, operate and transfer; rehabilitate, maintain and transfer and infrastructure bonds.

Some of the development partners helping the government implement the Roads 2000 Strategy, which aims at optimising the use of locally available resources in road construction and maintenance, are the French Development Bank, the European Union, the German Development Bank and the government of Finland.

According to KRB, during the period 2005-2010, the Road 2000 Strategy improved more than 7,000 km of rural roads, employed hundreds of youths and trained 5,600 labour-based contractors.