Pump prices for both diesel and petrol on the local market are likely to remain stable despite an increase in oil processing charges by Kenya Petroleum Refineries Company.

The Company which supplies fuel to the region, recently increased its processing fees for oil from $2.30 (Rwf1200) to $3.50 (Rwf1600) a barrel.

The Kenyan Company says it increased the prices to cater for its operating costs and raise money to upgrade its operations in the next five years. The new tariffs will be effective beginning next month.

While local stakeholders in the industry are yet to meet to discuss the way forward, the Government of Rwanda, which is charged with setting the price of sensitive products like fuel, is pondering to increase fuel subsidies in order to protect local consumers.

"We can not tell you what will happen now because we have to first meet with stakeholders in the industry and negotiate. However, government may increase its subsidy on fuel (reduce taxes).

This will offset the increase and maintain pump price,” Antoine Ruvebana, the Permanent Secretary in Ministry of Trade and Industry told Business Times on Saturday.

Ruvebana also pointed out that government had reduced its subsidy on fuel in the last two months but pump prices were not affected as the decrease was compensated by the reduction of international prices.

"If government wants the price to remain as it is, it will have to lower the tax on fuel by increasing subsidies,” he said.

The Permanent Secretary also mentioned that every month a review of the International oil prices is done in order to allow necessary adjustments to be made reflecting changes in the international market.

To align with the East African Community, government has had to reduce its taxation subsidy on fuel which was 40 percent of import duty.

While reading the 2009/10 budget, Minister of Finance and Economic Planning, James Musoni, told parliament that government will lose Rwf12.2 billion in the East African Customs Union partly due to a change in fuel taxation method. Government shifted from ad volorem to specific taxation in order to align with other EAC member states.

Pump prices for both diesel and petrol recently increased to Rwf860 from Rwf825 on each litre. 

Government proposed an increment on fuel levy from Rwf20 to Rwf62.4 per litre in order to bridge the deficit in the Road Maintenance Fund (RMF). The fund has an annual budget of Rwf10 billion.

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