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EDITORIAL: There is no basis for matatus to raise fares

by kenya-tribune

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The new prices of petroleum products released yesterday by the Energy Regulatory Commission should now stabilise transport costs that threatened to rise abnormally following the recent increases triggered by a higher tax regime.

President Uhuru Kenyatta has since signed the Finance Bill passed by Parliament on Thursday and which lowers the value added tax on petroleum products by half — from 16 percent to 8 percent — which development should translate into instant relief for the consumers.

For the past two weeks, Public Service Vehicles (PSV) have been threatening to raise fares, understandably, to cushion themselves against higher prices occasioned by the recent steep rise on fuel costs.

Immediately the 16 percent VAT fuel tax took effect at the beginning of this month, fuel prices rose by more than Sh20, with petrol, for example, reaching an all-time high of Sh127 a litre in Nairobi and even higher in other jurisdictions.

As we have argued several times in the past, this was extremely painful and unsustainable.

Our concern is that PSV operators have the propensity to raise prices using slightest of excuses. And the margins are always outrageous.

For them, any opportunity that presents itself is exploited to the maximum but to the detriment of consumers. Paradoxically, they never lower the prices when the fuel costs go down.

Even before the lowering of the tax, President Kenyatta had warned PSV operators against arbitrary price raise, which position we echo now given the reduction in the VAT rate.

There is no reason why the fares should rise. It behoves the regulator, the National Transport and Safety Authority (NTSA), to conduct regular check-ups to ensure that the PSV operators charge reasonable prices and those who act to the contrary are sanctioned.

The fact that ours is a liberal market and where pricing is determined by the market forces does not give any justification for exploiting consumers by levying higher fuel prices.

We recognise the new fuel rates will eat into the earnings of the operators but not in a manner as significant as to occasion price increase.

They are costs that can be easily accommodated within their processes and still realise profits. Put differently, there is no basis for increasing fuel prices.

At any rate, the fees charged is usually so high, giving them huge margins.

This is not to say that the PSV operators should be regulated, far from it.

But the point is that the operators have to learn to rationalise their costings and avoid the tendency of upping fares at the slightest of excuse.

Inevitably, it is going to be rough ride for everyone but notwithstanding that, reason must prevail.

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