State Fails to Pay Billions for Fuel Subsidy

The state has defaulted on fuel subsidy that keeps pump prices low for the December-January review that lapses today. The subsidy continues to be paid under a cloud of secrecy, sparking disquiet among the oil marketing companies ahead of the fresh pricing review to be effected from today midnight.

Oil marketers have been grappling with delays in the compensation after they took a cut for keeping fuel prices low during the December- January review.

A number of chief executives said that the government has not paid a single cent for the December-January review that lapses today in addition to other pending payments for November last year.

Industry regulator Energy and Petroleum Regulatory Authority (Epra) has since last year cut margins for the oil marketers to keep fuel prices unchanged and contain public outrage. The State uses funds from a fuel subsidy to compensate dealers.

Epra is set to announce a new pricing schedule today for the month to February 14 where dealers look set to take more hit if the State opts to cut their margins and keep prices unchanged.

“We are in a crisis. We were partially paid for the November-December cycle and nothing has been paid for the review ending today. If the government delays payment by over three months then that means marketers are in serious trouble, some of the financing comes from banks; do you think they care if you have been paid or not?”

Estimates based on the monthly consumption figures show that compensation due to oil marketers in the November-December cycle was Sh5.86 billion while that due for the cycle lapsing tomorrow is Sh8.12 billion.

Figures show that Kenya uses 165.45 million litres of super petrol every month, 220.57 million litres for diesel and 11.26 million litres for kerosene.

The industry regulator cut margins for oil dealers to zero in the November-December and December-January monthly reviews, saying it will compensate marketers at Sh18.32 per litre of Super, Sh21.89 per litre of diesel and Sh23.53 per litre of kerosene.

Sources at the Oil Marketers Association of Kenya (Omak), the industry lobby, have revealed that they now want the government to pay interest on the delayed funds, in what will come with another cost to taxpayers.

Delays in paying oil marketers come against the backdrop of revelations that Kenya diverted billions of shillings meant to compensate the dealers last year

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