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"id": 250421,
"url": "https://info.mzalendo.com/api/v0.1/hansard/entries/250421/?format=api",
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"type": "speech",
"speaker_name": "Mr. Ochilo-Ayacko",
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"id": 347,
"legal_name": "Ochilo George Mbogo Ayacko",
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"content": "Mr. Deputy Speaker, Sir, thank you for giving me an opportunity to May 3, 2006 PARLIAMENTARY DEBATES 863 contribute to this wonderful Motion. I want to thank Mr. Ojode for being mindful of the spiral- effect of the high cost of fuel in this country. Fuel cost is one of the reasons why we are losing a lot of foreign exchange. When I was the Minister for Energy, we had statistics to the effect that, we spent nearly Kshs40 billion importing petroleum products. At that time, and even now, Liquefied Petroleum Gas (LPG) was gaining currency as an item that required zero-rating when it came to taxation. The reason why we wanted LPG zero-rated was because we wanted to be mindful of the environment. We knew that about 70 per cent of domestic fuel in this country depended on firewood and products related to the environment. Therefore, to protect the environment, we proposed - and it was agreed - that LPG be zero-rated. To make this more widespread, there is need to scrap all taxes that are visited on kerosene. If we promote the use of kerosene and LPG, very few people will be dependent on wood fuel. We will be very friendly to the environment. Mr. Deputy Speaker, Sir, this is a good Motion. I believe that by zero-rating kerosene, we will be relieving the poor of this country of a big burden. All of us are assaulting poverty. It is the poor people who use kerosene. The reason why petroleum products are costly in this country are manifold. The first reason is that 90 per cent of petroleum products are in the hands of multinationals. Those multinationals source petroleum products jointly. They compete with the same form of knowledge and fix the prices. When I was the Minister for Energy, I attempted to deal with them. But they are a very difficult lot. They have invested in certain facilities like common storage and outlets. They have so many outlets to such an extent that a new player in the industry would not get an opportunity to access the market at, more or less, the same level of cost. So, the area that we need to revisit - and do so urgently - is to regulate the prices of petroleum products. Mr. Deputy Speaker, Sir, I know that South Africa is doing the same. In South Africa, you cannot just come and charge any price that you please. It is subject to regulation. That regulation has kept petroleum prices in that country very low. Most countries in Europe and United States of America have zero-rated taxes on petroleum products. To show that multinationals fix prices, let me give the following example. If you go to western Kenya, for instance, Kisumu, Eldoret, Bungoma and Kisii, prices of petroleum products are lower than in Nairobi. Even at times, the prices are lower than in Mombasa. Why is that? In western Kenya, there is flourishing presence of independent petroleum dealers. They are offering stiff competition to multinationals in those areas. I remember a period when the price of premium in Western Kenya was Kshs61 per litre. But it was Kshs65 in Nairobi. That had in-built the cost of transporting petroleum products from Mombasa to Kakamega. We did calculations backwards and found out that, at that particular time, the correct price of imported premium, even if you had paid duty in Mombasa, was about Kshs50. In Nairobi, there is heavy presence of multinationals. They are chopping off the independent petroleum dealers. More often than not, they decline to open up the common storage tanks for independent dealers. Therefore, they do not have an opportunity to do business in Nairobi and lower the prices. The other problem that must be dealt with is the Kenya Revenue Authority (KRA). For some time, KRA had insisted on payment of taxes up-front. Payment of taxes up-front became an excuse by multinationals to increase the prices, claiming that the cost of the money for paying the taxes had to be passed on to consumers. Time and again, successive Ministers for Energy have talked about increasing funding to the National Oil Corporation (NOC). The NOC is the public organisation that should be the price leader. But there has been reluctance on the part of the Ministry of Finance to give funding to the NOC. The corporation continues to be under-funded and it is unable to achieve its mandate, which is to import petroleum products and, therefore, it is not effective in terms of price reduction. Mr. Deputy Speaker, Sir, corporations like NOC, in most countries, including Nigeria and Malaysia, play very important roles in price control. They are the ones who import the petroleum 864 PARLIAMENTARY DEBATES May 3, 2006 products, set the prices and, therefore, multinationals are unable to sell at high prices. But right here, the NOC continues to plead with the Treasury for funding, even to build certain common user facilities, but the Treasury is reluctant to look in that direction. The Treasury and the Government have succumbed to too much pressure from the World Bank and IMF not to fund State corporations. I am sure if these State corporations were funded then oil prices would definitely come down. Mr. Deputy Speaker, Sir, I also want to say that the zero-rating of LPG gas has not been beneficial to the public because the building of the loading facility in Mombasa has been left to the private sector to take the lead. The driving engine in the private sector is profit all the time. If we legislate in this House and leave the benefit to the private sector, we end up not achieving what was intended. So, I want to humbly suggest to the Minister for Finance, and I am glad he is here in person, to look for plenty of money and fund the NOC, and also find a way of introducing regulation in the petroleum sector, because energy is key to production. A lot of investors who want to come to this country, and I am sure the Minister for Trade and Industry is aware, complain of the high energy costs in this region. With those remarks, I beg to support and thank the Mover of the Motion."
}