State compensates dealers Ksh8.6bn to keep fuel pump prices low

Oil marketers received Sh8.64 billion from the State in compensation for the five months to August when dealers kept fuel prices unchanged to diffuse public outrage.

Energy and Petroleum Regulatory Authority (EPRA) Director General Daniel Kiptoo made the revelations Tuesday when he appeared before the National Assembly committee on Finance and National Planning.

Diesel and kerosene prices remained unchanged from March review to this month, while consumers of petrol enjoyed the benefit with the exemption of May.

Director General Daniel Kiptoo

The move to keep fuel prices unchanged was meant contain public anger over the rising cost of living at a time the economy is still reeling from the Coronavirus-induced hardships.

“We (State) paid marketers Sh8,664,683,458 from March to this month when the prices were unchanged,” Mr Kiptoo told the committee.

The State had since the monthly review for March tapped into the fuel subsidy to compensate the oil dealers for cutting their margins.

Kenya discontinued the subsidy starting with the monthly review to October 14, a move that pushed pump prices to record highs and piled more pressure on motorists, businesses and households who are still reeling from the economic meltdown of the Coronavirus pandemic.

Epra removed subsidies of Sh7.10 on petrol, Sh9.90 on diesel, increasing the price of petrol by Sh7.58 a litre in Nairobi to Sh134.72 while diesel jumped Sh7.94 to Sh115.6 a litre — the highest in Kenya’s history.

Removal of the Sh11.36 on kerosene pushed the cost of the commodity to Sh112.96 per litre, hurting low-income families who rely on kerosene for cooking and lighting.

Epra has attributed the increase in fuel prices to the global recovery in crude costs as the world recovers from the Covid-19. Crude prices hit for $79 per barrel on Monday.

Mr Kiptoo did not disclose what prompted removal of the subsidy, saying that only the Ministry of Petroleum can explain the reasons.

“I do not know why the subsidy was stopped. It is a policy issue and the right people to ask is the ministry of Petroleum,” Mr Kiptoo said.

The fuel subsidy is supported by billions of shillings raised from fuel consumers through the Petroleum Development Levy, which was increased to Sh5.40 a litre in July last year from Sh0.40.

The fund is meant to cushion consumers from volatility in fuel prices but has also seen motorists lose out when paying the Sh5.40 for a litre at the pump.

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