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THE government is considering  re-introducing the annual road licence fee and  imposing a fresh insurance levy  to sustain its roads maintenance budget.

This is is driven by concern that the growing adoption of Electric Vehicles (EVs), could cut fuel consumption and affect the fuel levy currently charged at the pumps.

According to Kenya Roads Board (KRB), the country  is heavily reliant on second-hand cars from Japan which plans to electrify all new passenger vehicle sales by mid-2030s, with a broader, more industry-specific focus on 100 per cent electrification for commercial and new vehicles by 2040, to achieve carbon neutrality.

Major automakers like Honda have since pledged 100 per cent battery electric vehicle (BEV) sales by 2040, though they are currently recalibrating strategies toward hybrid models. 

“We import up to eight-year old cars so by 2038, the cars that will be imported from Japan will be fully electric so they will not consume any fuel. Of course, there will still be the existing vehicles, but as time goes by, the fuel levy will cease to exist,” KRB acting director genera, Martin Agumbi told the Star.

To safeguard road maintenance funds, the government is planning a return of the annual road license fee (which was referred to as the "road sticker"), that was replaced by the RMLF established through an Act of Parliament assented to on December 16, 1993, and officially commenced on December 31, 1993.

Road license fees (often referred to as annual motor vehicle tax or vehicle registration renewal fees) are primarily calculated based on a vehicle's engine capacity, weight, type and usage. 

Vehicle owners could also be required pay for road usage based on distance, and a certain percentage when renewing insurance, which will go towards road maintenance.

“We are considering other ways of raising funds for road maintenance. One of them is to install gadgets in electric vehicles to determine road usage and also introducing a road insurance levy, say one per cent,  to cater for damages caused by accidents such as damaged bridges and signages ,” Agumbi noted.

Currently, there are nine different taxes and levies on fuel products, charged per litre, with Value Added Tax, Road Maintenance Levy and Excise Duty as the main ones.

The government gets Sh25.17 and Sh23.51 on every litre of petrol and diesel as VAT, respectfully, while taking Sh21.21 on every litre of kerosene imported into the country.

Road Maintenance Levy is at Sh25 per litre of petrol and diesel while excise duty is currently at Sh21.95 for petrol and Sh11.37 for diesel and kerosene.

The road maintenance levy collected by Kenya Revenue Authority and managed by Kenya Roads Board (KRB) goes into the Roads Maintenance Levy Fund (RMFL).

This is then distributed to road agencies (KeNHA, KeRRA, KURA) and Kenya Wildlife Service, for the maintenance and rehabilitation of road networks including in parks. Annual average collections are at Sh115 billion, according to KRB.

Fuel consumption in the country has stagnated at 4.6 billion litres annually for the last three to four years. 

The uptake of EVs in Kenya continues to grow, albeit at a slow rate, with an estimated five per cent of all vehicles on the roads being electric by this year.

Overall EV passenger vehicles are forecasted to be over 30,000 by the year 2030, industry projections show.The country is expected to have over 200,000 electric two-wheelers by 2030 and more than 1,865 three-wheelers or commonly known as tuk tuks.

The Draft National e-Mobility Policy (2024) addresses the need to reduce over-reliance on Road Maintenance Levy by developing sustainable alternative financing structures, as the country works towards going green.

In 2020, Kenya submitted an ambitious Nationally Determined Contribution (NDC) to the United Nations Framework Convention on Climate Change (UNFCCC) Secretariat that committed to reducing emissions by 32 per cent by 2030.

“As one of the main contributors to emissions in the country, the transport sector is at the heart of the realisation of this target,” the policy document notes.

The National Climate Change Action Plan (NCCAP) 2018- 2022 and its successor 2023-2027 identify the uptake of electric vehicles (EVs) as one of the climate actions in the transport and energy sectors.

Equally, the National Energy Efficiency and Conservation Strategy (2020) had envisioned that by 2025, five per cent of all registered vehicles in Kenya would be electric powered.

Similarly, the long-term strategy for greenhouse gas emissions reduction aims at net zero by 2050 targeting transition to e-mobility.