Kenya allocates millions to subsidize cooking gas

Kenya has allocated 471 million Kenyan shillings to the stalled cooking gas subsidy scheme for the new financial year starting in July, with plans to raise the amount to 820 million Kenyan shillings in the following financial year. This increase represents a significant jump from the previous financial year, with hopes of targeting low-income households to benefit from the subsidy program. However, the reality on the ground paints a different picture, as challenges in implementation and sustainability continue to plague the initiative. Chashiro Guto from IC Asset Managers sheds light on the complexities surrounding the cooking gas subsidy program. The ultimate goal of the subsidy program is to increase LPG usage in Kenya from around 10 percent to 70 percent within a three-year period. Yet, progress has been slow, with only a fraction of the intended beneficiaries actually benefiting from the program. While the government aims to target 100,000 households in the next financial year, the actual number of beneficiaries thus far has fallen short of initial projections. Despite the government's commitment to increasing access to affordable cooking gas, the introduction of a 16% VAT on LPG last year has created a counterproductive effect. The same government that imposed the VAT is now offering subsidies to mitigate the increased cost of gas for consumers. This conflicting approach has raised questions about the feasibility and sustainability of the subsidy program. National Oil Corporation, tasked with implementing the program, faces challenges in distribution and capacity. The absence of adequate distribution channels and infrastructure hinders the effective delivery of subsidized gas cylinders to low-income households. The planned construction of LPG import handling facilities in Nairobi and Mombasa has also faced setbacks due to budgetary constraints. As a result, the implementation of the subsidy program has been hindered by logistical and operational limitations. Furthermore, the recent fuel subsidy announced by the government has drawn skepticism from the World Bank due to concerns about its sustainability. This raises doubts about the government's ability to maintain the cooking gas subsidy amidst ongoing financial pressures. While budgetary allocations are essential, addressing other key challenges such as rising costs of LPG, distribution inefficiencies, and regulatory hurdles is crucial for the success of the program. Chashiro Guto emphasizes the importance of a holistic approach to tackling the obstacles hindering the widespread adoption of LPG in Kenya. Simply relying on subsidies may not be enough to achieve the ambitious goal of increasing LPG usage to 70 percent. The government must address systemic issues and implement comprehensive measures to create a sustainable and efficient LPG ecosystem for all Kenyan households.