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Gas prices to hit 6-year high today on new tax

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Gas prices to hit 6-year high today on new tax


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LPG vendor in Nyeri. FILE PHOTO | NMG

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Summary

  • The Kenya Revenue Authority (KRA) said it would impose the 16 percent tax at the start of the new financial year in what is set to push the commodity out of the reach of most households.
  • Cooking gas prices haven’t changed much over the past year despite the volatility in the global crude oil.

Cooking gas prices will today hit a six-year high after the Treasury reintroduced a 16 percent value added tax (VAT) on the commodity, adding to the pain of costly energy like fuel and electricity.

Households will pay at least Sh350 more for the 13-kilogramme cooking gas that is expected to retail at Sh2,600 on average — a price level last seen in March 2015.

This is line with the Finance Act that reinstated VAT on liquefied petroleum gas (LPG), but delayed the levy for one year to July due to concerns about the cost of living.

The Kenya Revenue Authority (KRA) said it would impose the 16 percent tax at the start of the new financial year in what is set to push the commodity out of the reach of most households struggling with depressed incomes.

“The effective date of the amendment is 1st July 2021. This means that the supply of liquefied petroleum gas will be subject to VAT at standard rate of 16 percent from 1st July, 2021,” the KRA said in an email response to the Business Daily.

The new tax comes at a time when crude oil prices have hit new highs, piling further pressure on LPG costs.

Expensive cooking gas will add to rising energy prices that have become a political headache for the government, which has in the past three months been forced to offer fuel subsidies to defuse public outrage over a monthly review that would have pushed costs to a historic high.

Yesterday, inflation rose to a 16-month high of to 6.32 percent on costly fuel, food and electricity in a period when employers, including the government, have frozen wage increases.

“We must remit a 16 percent VAT for every cylinder sold or refilled. It is natural that we will pass the added cost to consumers,” said Martin Chomba, the chair of Petroleum Outlets Association of Kenya.

Cooking gas prices haven’t changed much over the past year despite the volatility in the global crude oil market during the period when petrol prices oscillated between a low of Sh89.10 a litre in June last year to the current high of Sh127.98.

Kenyan households have since June 2016 been enjoying low cooking gas prices after the Treasury scrapped the tax on LPG to cut costs and boost uptake among the poor who rely on dirty kerosene and charcoal for cooking.

Prices for the 13-kilogramme cooking gas fell to below of Sh2,000 in October 2016 after the Treasury scrapped the 16 percent VAT.

The LPG prices are not controlled unlike other petroleum products and the new tax will fuel fears that dealers could exploit the market forces to their advantage, even as international crude prices continue to rise.

The energy regulator in 2010 started controlling prices for diesel, petrol and kerosene to cushion consumers from high prices, blamed on cartel-like behaviour among dealers.

Cooking gas was left to the market forces of supply and demand.

The rise in the cost of cooking gas is expected to pile pressure on families that are struggling to foot daily bills due to job losses and drastic cuts in earnings in the wake of the coronavirus pandemic.

Dealers reckon that a jump of Sh350 on LPG prices will be the biggest in more than two decades.

Kenyans on social media have recently raised concern over reduced cash flow, fewer employment opportunities and mounting public debt, which triggered a petition to the International Monetary Fund (IMF) to stop giving the country more loans.

The petition from the Kenyans on Twitter came days after the IMF approved a $2.34 billion (Sh250 billion) loan on April 2 to help the country respond to the Covid-19 pandemic and address its debt vulnerabilities.

Kenya was hit hard at the onset of the pandemic, but its economy has been picking up after posting a slight contraction of 0.1 percent in 2020, the IMF said.

The return of VAT on cooking gas comes despite attempts by a section of lawmakers and industry lobby, Petroleum Institute of East Africa (PIEA), to push for its delay.

National Assembly Speaker Justin Muturi last week backed the House committee that had rejected proposal to delay the tax, saying it would derail the revenue collections and hurt financing of development projects in the year to next June.

“The proposals would have far-reaching implications on revenue collection and would greatly affect the implementation of the national budget,” Mr Muturi ruled last Thursday when Parliament debated and voted on the Finance Bill, 2021.

Dagoretti South MP John Kiarie had proposed to delay the imposition of the 16 percent VAT on cooking gas to July 1, 2024 and consumers struggling with the financial hardships of the coronavirus.

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KQ resumes Mumbai flights after 4 months

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KQ resumes Mumbai flights after 4 months


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A Kenya Airways aircraft at JKIA. FILE PHOTO | NMG

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Summary

  • Kenya Airways will on Thursday resume flights to Mumbai, ending a four-month hiatus that was occasioned by increased cases of Covid-19 in the Asian state.
  • The airline in a notice to its customers yesterday said it will resume its operations on the route on September 16, 2021 with the first flight departing Jomo Kenyatta International Airport at 7am to arrive in Mumbai at 3:45 pm.

Kenya Airways #ticker:KQ will on Thursday resume flights to Mumbai, ending a four-month hiatus that was occasioned by increased cases of Covid-19 in the Asian state.

The airline in a notice to its customers Monday said it will resume its operations on the route on September 16, 2021 with the first flight departing Jomo Kenyatta International Airport at 7am to arrive in Mumbai at 3:45 pm.

The airline will then resume full operations on the route on September 20, flying three times per week on the Indian route, which is one of the most lucrative destinations on its network.

Passengers on the route will part with Sh46,000 ($419) for one-way air ticket on economy class seats from Nairobi to Mumbai- prices that are relatively the same compared to what it was charging before the Covid-19 pandemic.

“Welcome back onboard! Fly from Nairobi to Mumbai starting Thursday 16th September with normal schedules resuming from Monday 20th September 2021,” said the airline in a notice to its customers yesterday.

KQ Suspended passenger flights to and from Mumbai on April 30 until further notice, following a government directive on travel between India and Kenya due to a Covid-19 crisis in that country.

The airline said on Friday that passengers who had booked tickets after May 1, the date of the last flight from Mumbai to Nairobi, will have to change their plans.

Affected passengers, KQ said, could also take vouchers for the value of their fare for future travel within 12 months.

India has seen soaring infection rates in the recent days, since the discovery of a new virus variant. Last month, India put on lockdown one of the states following a spike in cases of Covid-19.

Other countries that have banned flights to India include France, the UK Bangladesh, Oman and Hong Kong that have banned travel to and from India or asked their nationals coming from the Asian country to isolate themselves in government-approved hotels.

India has so far detected 33,264,175 corona virus cases with the number of deaths hitting 442,874 as at September 13.

A large number of patients from Kenya also travel to India every year for specialised medical treatment, especially cancer care, helping to drive medical tourism in the densely populated country that boasts affordable and easily accessible healthcare.

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Lower import volumes push mitumba prices to new highs

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Lower import volumes push mitumba prices to new highs


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Man pulls a cart loaded with second-hand clothes at Gikomba Market in Nairobi. FILE PHOTO | NMG

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Summary

  • Traders paid Sh100,527 on average per tonne of the used clothes, popularly called mitumba, compared to Sh96,286 the previous year.
  • Kenya Bureau of Standards (Kebs) banned importation of the clothes from late March through mid-August in a bid to contain the spread of the life-threatening coronavirus infections.
  • Findings of the Economic Survey 2021 suggests dealers shipped in 121,778 tonnes of mitumba in 2020, a 34.02 percent fall compared with 2019 and the lowest volumes since 2015.

The average price of a tonne of second-hand clothing items imported into the country crossed the Sh100,000 mark for the first time last year on reduced volumes in the wake of safety protocols and guidelines to curb spread of coronavirus.

Traders paid Sh100,527 on average per tonne of the used clothes, popularly called mitumba, compared to Sh96,286 the previous year.

Kenya Bureau of Standards (Kebs) banned importation of the clothes from late March through mid-August in a bid to contain the spread of the life-threatening coronavirus infections.

Findings of the Economic Survey 2021 suggests dealers shipped in 121,778 tonnes of mitumba in 2020, a 34.02 percent fall compared with 2019 and the lowest volumes since 2015.

Last year’s drop was the first dip since 2011 when 76,533 tonnes were shipped in compared with 80,423 tonnes the previous year, the official data collated by the Kenya National Bureau of Statistics (KNBS) shows.

The import bill for the merchandise amounted to Sh12.24 billion, a drop of 31.11 percent, or Sh5.53 billion, year-on-year.

TIn imposing the temporary ban on used clothes, Kebs had applied a standard which prohibits buying second-hand clothes from countries experiencing epidemics to ensure disease-causing microorganisms are not imported into Kenya.

Higher quality and relatively lower prices for mitumba has continued to drive demand for used clothes at expense of locally-made products amid higher margins enjoyed by traders largely operating in informal markets.

The lucrative second-hand clothing market has seen traders from China —a key source market for the merchandise —open shops in Gikomba, Kenya’s largest informal market for mitumba, in recent years to cash in rising demand.

Earnings from exports of articles of apparel and clothing accessories fell 5.32 percent to Sh32.92 billion last year compared with 2019, data indicates.

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Court backs Atwoli union in horticulture membership feud

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Court backs Atwoli union in horticulture membership feud


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Cotu boss Francis Atwoli. FILE PHOTO | NMG

Summary

  • A trade union that is led by the long-serving Central Organisation of Trade Unions (Cotu) boss Francis Atwoli has survived an attempt to stop it from representing over 60,000 workers in the horticulture industry.
  • Newly registered Kenya Export, Floriculture, Horticulture, and Allied Workers Union (Kefhau) had filed as a case in the Employment and Labour seeking to bar the Atwoli-led Kenya Plantation and Agricultural Workers Union (KPAWU) from representing workers in the industry.

A trade union that is led by the long-serving Central Organisation of Trade Unions (Cotu) boss Francis Atwoli has survived an attempt to stop it from representing over 60,000 workers in the horticulture industry.

Newly registered Kenya Export, Floriculture, Horticulture, and Allied Workers Union (Kefhau) had filed as a case in the Employment and Labour seeking to bar the Atwoli-led Kenya Plantation and Agricultural Workers Union (KPAWU) from representing workers in the industry.

Mr Atwoli is the secretary-general of KPAWU. The rival union claimed KPAWU had encroached on its area of workers’ representation.

Justice James Rika, however, dismissed the claim and ruled that the dispute should have been taken through conciliation, and was therefore presented in court prematurely.

He also stated that Kefhau must go beyond its registration and recruit sufficient members from the employers, to be granted recognition and organisational rights.

“Registration on its own, does not afford the claimant (Kefhau) recognition. Until there is proof that Kefhau has satisfied Section 54 of the Labour Relations Act, the status quo must be maintained,” said the judge.

“Kefhau must recruit at least 50 percent plus one, of the unionisable employees in the floriculture and horticulture industry, members of the Agricultural Employers Association to be considered for recognition,” he stated.

He noted that there is a Recognition Agreement and CBA, binding Mr Atwoli’s union and Agricultural Employers Association, affecting 73 Flower Growers Group of employers, and over 60,000 employees.

“It is objectionable for Kefhau to be allowed organisational rights, and the legitimacy to receive trade union dues and agency fees, from over 60,000 employees, just on the strength of registration as a trade union,” said the judge.

Kefhau wanted the court to declare that it is the sole trade union, which is allowed by its constitution to carry out activities in the export floriculture and vegetable industry, and an order restraining Mr Atwoli’s from representing workers in that area.

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