Thursday, April 28, 2011

Kibaki, Raila cut food, fuel prices

By ALEX NDEGWA AND JOHN NJIRAINIPresident Kibaki and Prime Minister Raila Odinga have ordered a series of measures they hope will help reduce the cost of living by encouraging food and fuel price cuts.
A day after meeting to discuss the desperation of Kenyans in the face of soaring fuel prices, which in turn triggers high cost of food and transport, the burden of facing the country to explain what Government is doing fell on Raila.
Parliament, and specifically his weekly Prime Minister’s Time, gave him the platform to address the issues that have seen the Kibaki administration threatened with mass protests by civil society groups and trade unions.
Raila gave a four-point plan to address the problem besieging every Kenyan home today, but even at the end, the question remained: How effective it would be in forcing price cuts in the sectors dominated by cartels and brokers staking out for a piece of the cake.
To appease Kenyans, Raila first promised that the minimum wage would be increased on Sunday when the world marks Labour Day. Secondly, all taxes on kerosene, which is used mostly by ordinary Kenyans for cooking and lighting, would be removed.
The Prime Minister also announced import duty on maize and wheat would be lifted as part of the measures to stem runaway costs of essential commodities triggered by high fuel prices.
"For immediate relief, the Government has removed all taxes and levies on kerosene to reduce the cost of light and cooking energy. This will reduce kerosene price by Sh5.66 per litre, in addition to the reduction of Sh2 per litre (of diesel) announced by the Treasury last week," the PM said.
School fees waiverHe also announced the Government would waive secondary school fees in drought-hit areas.
Last week, Deputy Prime Minister Uhuru Kenyatta, who is also the Finance Minister, reduced tax on kerosene by 30 per cent. That was to have reduced the price of a litre by Sh2 to Sh88. With the announcement that it has been zero-rated, its price will now drop by another Sh5.66, and would see the price of one litre drop to Sh81.
Raila told Parliament the measures followed consultations with President Kibaki. However, Kenyans will have to wait a little longer before they can enjoy the reduced cost of kerosene, which soared to an all time high of Sh90.90 per litre, sparking street protests, because tax measures of 30 per cent and above must be sanctioned by Parliament.
Demonstrations on the streets of Nairobi following rising food and fuel prices. [PHOTO: MGUGUA KIBERA/STANDAD]
Raila said appropriate legislation would be introduced in the House "as soon as possible" to effect the measure.

"I expect that this House will act with utmost urgency, so that Kenyans receive this much needed relief very soon," he added.
The new measures will see the price of maize and wheat flour reduce owing to the Government’s decision to zero-rate imports of the two commodities.
A two-kilogramme of wheat flour packet costs Sh130, up from Sh90 three months ago. Bread prices have risen from Sh30 to Sh40 over the same period.
Unpredictable weather patterns in major wheat producing countries have sent prices up to record levels in the international market, a problem compounded by a depreciating shilling.
The Cereal Millers Association had proposed the Government removes import duty on wheat and maize to mitigate the effects of the drought.
The millers appealed to the Government to remove import duty on wheat and maize, whose shortage they say has pushed up prices beyond the reach of many consumers.
They also proposed the Government zero-rate maize to open the market for alternative supply.
The Government’s previous decision to reduce import duty on wheat from 35 per cent to 10 per cent has, however, failed to push prices down.
Importation of maize attracts 50 per cent import duty while wheat is charged at 10 per cent.
It is feared that the country would lose long-rain harvest especially maize that comes with rainfall in April and thus no major maize harvest would be available before next year.
Wednesday’s announcement by Raila is believed to have been reached after realisation reduction of taxes on diesel and kerosene by 20 and 30 per cent did not calm public rage.
The Central Organisation of Trade Unions has been on the warpath, threatening to call workers to strike should the Government fail to raise the minimum wage. Consumer associations have also described the Treasury cuts as insignificant.
Raila, however, ruled out implementing price controls on basic commodities despite pressure by MPs.

"This is a liberalised economy and we would want the market to be the main determinant of prices.
Crude capitalismWe are not trying to implement crude capitalism of everyone for himself and God for us all but a free market with a human face," Raila explained.
Mathira MP Ephraim Maina, who sponsored the Price Control Bill (Essential Goods) that was rejected by the President, had warned there were no guarantees prices of commodities would come down.
To help starving Kenyans, Raila said the Government would increase the beneficiaries of relief food to four million, up from the current 2.4 million people.
The PM announced the food subsidy programme for poor households would be scaled up after Cabinet approval to provide Sh2000 per month to 100,000 people in six informal settlements in Nairobi, Mombasa and Kisumu.
This followed the completion of the pilot project involving 5,000 families in Korogocho and Mukuru and 2,500 families in Mathare — all in Nairobi — who received Sh1, 500 per month over eight months.
The PM said the second phase of a reformed Kazi Kwa Vijana programme would be implemented for which the World Bank is providing US$60 million (about Sh48pm).
Raila’s announcement came as concerns were being raised on why the Treasury has not gazetted the changes in tax on diesel and kerosene, which Uhuru announced a fortnight ago.

When the reduction in excise tax on the two fuels is implemented, the cost of kerosene and diesel should drop by Sh2.16 and Sh2.06. Currently they trade at Sh90.91 and Sh107.52.
Kenya Consumers Organisation executive director Francis Orago said Kenyans are still suffering. He said the Government has left them at the mercy of buccaneers and cartels.
The Kenya Revenue Authority announced it was waiting for Uhuru to gazette his changes.
"We are waiting for the legal notice so that we can reconfigure our system to be consistent with the new tax rates," explained Kenya Revenue Authority spokesman, Kennedy Onyonyi.
But the Director of Communications at Mr Uhuru’s office claimed Easter Holiday had delayed the gazettement.
"We expect the notice to be published on Thursday," he said.
Additional reports by James Anyanzwa

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