Treasury seeks cut in road levy share to ease fuel prices

Facing continued strain on household and transport costs linked to elevated fuel prices, the National Treasury has introduced a new proposal that would reduce the share of fuel levy funds directed to road construction projects under the annuity model, as part of wider efforts to soften pump prices.

The plan seeks to lower the allocation to the Road Annuity Fund from Sh 3 to Sh 1.50 per litre of petroleum products, effectively revising how fuel levy proceeds are distributed between road financing and price stabilisation measures.

The proposal is outlined in the Road Maintenance Levy Fund (Amendment) Bill, 2026, which is now under consideration in Parliament. It sets out a direct change to the current statutory formula governing the allocation.

“The section is amended in subsection (2) by deleting the words ‘three shillings’ and substituting therefor the words ‘one shilling and fifty cents’,” the Bill reads in part.

If adopted, the adjustment would reduce the resources channelled to the Road Annuity Fund, which supports infrastructure development through a model where private contractors finance road construction and are later repaid by government over time.

Treasury has linked the proposal to ongoing measures meant to ease pressure on fuel consumers, citing disruptions in global supply chains influenced by geopolitical tensions involving Iran as one of the contributing factors behind high prices.

The move also builds on earlier government actions, including a reduction of Value Added Tax on petroleum products from 13 per cent to 8 per cent, aimed at stabilising retail fuel costs.

In Nairobi, current maximum pump prices stand at Sh 197.60 per litre for Super Petrol, Sh 196.63 for Diesel, and Sh 152.78 for Kerosene, keeping transport and household energy costs elevated.