Government downplays the impact of road maintenance levy increase
Kenya Roads Board says the Ksh7 road maintenance levy increase will affect the rich more
Kenya Roads Board says the Ksh7 road maintenance levy increase will affect the rich more.
The Kenya Roads Board (KRB) is projecting minimal impact for Kenyans should the Road Maintainance Levy (RML) be increased from Ksh18 to Ksh25 per lire of fuel.
In an impact statement, the board acknowledged that the increase of the levy by Ksh7 will lead to the rise of fuel products and basic household commodities.
However, it was noted that the impact will be minimal owing to the expected returns from road investments done using the levy.
According to KRB, the rise in operation costs for vehicles will be mitigated by the well-maintained roads. The RML is usually used to maintain various road projects across the country.
“Selvianti, Lakawa, and Hawa noted in their 2021 study on the effect of road conditions on Vehicle Operating Costs (VOC) that the effect of road surface distress is at least 8.9% higher VOCs for light vehicles and this is much higher for heavy goods vehicles.
“Thus, if revenues of the fuel levy are indeed used to improve road conditions, the net effect should be a saving in VOC and an improvement of the competitiveness of Kenyan truckers,” read the statement in part.
On the other hand, the board noted that the majority of Kenyans rarely consume fuel products directly. Therefore, Kenyans in the upper class are likely to bear more burden than Kenyans in the middle and lower classes.
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“It has been noted that focusing on direct expenditure, petroleum expenditure is highly concentrated at the top of wealth distribution. Petroleum products could be viewed as a luxury and so will be more focused at the top of the income distribution,” read the report in part.
“Therefore, focusing exclusively on direct effects, the conclusion is that price changes induced by an increase in fuel levy will affect the rich more than the poor. On average though, increases in fuel taxes will have a limited direct impact on household welfare.
KRB is proposing to increase the levy rates which was last amended in 2016.
The government has been collecting an average of Ksh80 billion every year through the enforcement of the levy.
KRB noted that the review of Ksh25 would be necessary given that there were pending maintenance works across the country.
“Effective July 2016, the RMLF rate has remained constant at Ksh18 per litre. The annual collections have matured at Ksh80 billion. Due to inflation, the current annual road maintenance levy increase collections are equivalent to Ksh52 billion in 2016 prices,” the board added.
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