Auditor General Nancy Gathungu Flags Discrepancies In Oil Price Stabilisation Payments

• A staggering KSh 139.1 billion has been used in the fuel subsidy programme since the beginning of the programme in 2021
• Oil marketers received KSh 5.3 billion in advance, and the AG says there was no legal framework for the advance payments
• AG report also revealed that KSh 2.2 billion in administration costs was unjustifiably included in the pump price build-up

Elijah Ntongai, a journalist at TUKO.co.ke, leverages more than three years of expertise in financial, business, and technology research, providing insights into both Kenyan and global economic trends.

The auditor general (AG) flagged discrepancies in the authorisation, release, and use of advance payments released to oil marketers for price stabilisation in a review of expenditures incurred for the financial year 2022/2023.

The reports, covering the financial years 2020/2021, 2021/2022, and 2022/2023, disclosed that a staggering KSh 139.1 billion was used in the fuel subsidy programme.

Discrepancies in advance payments

According to the report published by the Office of the Auditor General (OAG), oil marketers received an advance payment of KSh 5.3 billion to stabilise prices.

The AG noted that the advance payment was not based on any legal framework and lacked subsequent evidence of how the money was recovered from oil marketing companies.

Kenyans paid high fuel prices despite subsidies

In the report, KSh 2.2 billion was attributed to administration costs, and according to the AG, these costs were irregularly included in the pump price build-up, thus increasing the cost of petroleum products.

Kenyans, the end consumers of the oil imports, had to bear a burden of KSh 3.1 billion as demurrage charges due to inefficiencies at the Kenya Pipeline Company Limited.

"The stabilisation programme may have been hampered by avoidable additional costs which were passed on to the consumers and may not have cushioned the citizens from the high pump prices," read the report in part.

Government still owes oil marketers

Speaking to TUKO.co.ke, Petroleum Outlets Association of Kenya chair Martin Chomba said that the government can only subsidise fuel prices in accordance with the petroleum development levy when the prices are increasing.

Chomba also stated that he would like to see some of the money used to cater for the debt owed to the oil marketing companies (OMCs).

"When prices are going down, we do not expect to use that petroleum development levy to cushion Kenyans at the moment. But, I would expect that the petroleum development levy will be used to help in offsetting some of the money owed to the OMCs," said Chomba.

Avoidable costs are passed on to customers.

The report revealed that the demurrage costs passed on to customers were avoidable, considering that the leading causes of demurrage charges included scheduling inefficiencies, ullage constraints at the Kenya Pipeline Company Limited receiving facilities and importers' change of vessel arrival dates.

The absence of a legal framework for advance payments and the inclusion of administration costs in the pump price structure also raise concerns about avoidable costs that consumers may have incurred.

Fuel prices drop in December.

Four days ago, the Energy and Petroleum Regulatory Authority (EPRA) released the revised maximum retail prices for petroleum products, effective from December 15, 2023, to January 14, 2024.

During the reviewed period, the maximum pump price for Super Petrol decreased by KSh 5.00 per litre, Diesel by KSh 2.00, and Kerosene by KSh 4.01 per litre.

As a result, consumers in Nairobi can expect to pay KSh 212.36, KSh 201.47, and KSh 199.05 for a litre of Super Petrol, Diesel, and Kerosene, respectively.