Chirchir: Fuel levy hike to help manage Sh724 billion road maintenance backlog
By Lucy Mumbi |
Currently, the government's annual budget for road projects is capped at Sh55 billion.
The government has justified its decision to raise the road maintenance levy by Sh7 per litre of both petrol and diesel, citing a substantial backlog of Sh724 billion in road maintenance needs.
According to Roads and Transport Cabinet Secretary Davis Chirchir, the current levy has been insufficient to meet the growing demands of maintaining and expanding the country's road network.
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Speaking before the Senate, Chirchir explained that the annual collection from the existing levy has stagnated at Sh79 billion since 2016, while the cost of road maintenance has surged. He said the new levy increase to Sh25 per litre is essential for bridging the funding gap.
“A proposal to increase the Road Maintenance Levy by Sh7 from Sh18 to Sh25 per litre was developed to partially address this maintenance gap. The adjustment in the fuel levy rate was a critical and urgent step; without it, recent investments in new road construction would largely be in vain,” he said.
The CS revealed that it will take approximately 15 years to fulfil all road project commitments, at a cost of nearly Sh700 billion. This includes Sh165 billion in outstanding bills.
Currently, the government's annual budget for road projects is capped at Sh55 billion, highlighting the need for additional funding through the levy increase.
Chirchir said since 2016, Kenya's road network has expanded by 77,671 kilometres, adding to the strain on maintenance resources. The CS pointed out that Sh157 billion is required for maintaining national roads in the fiscal year ending June 30, 2025, but the anticipated revenue from the fuel levy will fall short by Sh78 billion.
Chirchir noted that the funding gap has led to a significant shortfall, resulting in the suspension of several maintenance activities due to a lack of budget.
The CS also highlighted that maintaining the real value of the 2016 levy would require it to be set at Sh59 per litre, given the growth in the road network.
Currently, 69 per cent of the road network is in good or fair condition, while 30 per cent remains in poor condition and requires substantial resources for restoration.
Chirchir said the increased levy will enable the maintenance of an additional 15,000 kilometres of roads annually, raising the total to 55,000 kilometres under maintenance.
The CS attributed the funding shortfall to inflation, rising construction costs, and the depreciation of the Kenyan shilling. He noted that the current rate of Sh18 per litre, when adjusted for inflation and the devaluation of the shilling, equates to Sh5.49 per litre in 2016 terms.
“Given that some roadwork materials are imported, the declining value of the shilling has increased the cost of these materials. The current RMLF collections are equivalent to Sh52 billion in 2016 terms, whereas maintaining the 2016 value would require Sh122 billion annually,” Chirchir said.
He also proposed a legislative adjustment to allocate part of the fuel levy specifically for rural roads, which would be managed by the Kenya Rural Roads Authority.
“This refinement in fund management should significantly enhance the maintenance of rural roads,” he said.
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