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Vivo ends contracts of 4 service station dealers accused of adulterating fuel

Vivo managing director Polycarp Igathe. PHOTO | FILE
Vivo managing director Polycarp Igathe. PHOTO | FILE  

Oil marketer Vivo Energy, which operates the Shell brand, says it has terminated contracts of dealers of the four service stations named in newspapers for adulterating fuel for higher profits.

Polycarp Igathe, the Vivo managing director, said the four were replaced with new dealers at Shell Valley Road station in Nairobi, Gatundu station (Kiambu), Wundanyi branch (Taita Taveta) and Kisii station.

The Energy Regulatory Commission (ERC) named the stations as having mixed petrol and diesel with kerosene — which is cheaper — to boost their margins at the expense of motorists who risk damaged car engines.

The oil marketer, with 165 branches, operates its stations under a franchise model.

“We kicked out the four independent dealers,” said Mr Igathe, adding that the marketer has stopped selling kerosene at its stations to effectively combat fuel contamination.

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The ERC published a list of 56 service stations accused of adulterating fuel, including those operated by Total, KenolKobil and OiLibya.

This saw Mr Igathe, who is also the chairman of oil industry Supply Coordinator (Supplycor) Kenya Ltd, fault the energy regulator arguing that the dealers had already paid fines and that the shaming of the marketers in newspapers was unwarranted.

Vivo’s market share stood at 16.2 per cent last year, second to Total Kenya at 18.5 per cent.

Contaminated petrol and diesel also amounts to tax cheating, according to ERC, together with dumping of export-bound fuel in the local market.

The Petroleum Institute of East Africa (PIEA), the oil dealers’ lobby, has in the past said that the bulk of kerosene is used for adulteration of petrol and diesel due to the huge price difference.

Petrol, mainly used by private cars, currently retails at Sh85.58 a litre in Nairobi while diesel, used to power trucks, buses and factories costs Sh65.70. Kerosene costs Sh42.15 a litre. The variation in prices is mainly due to different taxes each product attracts.

Petrol has an excise duty of Sh19.89 a litre while the levy on diesel stands at Sh8.24.

Kerosene is zero-rated. Petrol and diesel also attract a road levy charge of Sh12 a litre that is not applied to kerosene.

The government in 2011 scrapped taxes on kerosene, mainly used by low-income homes for lighting and cooking, to cushion the poor against the rising cost of living after inflation hit a high of 19 per cent.

Inflation stood at 6.84 per cent last month.

The energy regulator allows marketers a profit margin of Sh7 per litre for wholesale and Sh3.89 for retail in what dealers have termed as too low compared to their finance costs.

The marketers have been pushing for an upward review of the margins to protect their bottom lines.

The government started carrying out a monthly review of retail fuel prices in 2010 after they shot up, raising the cost of living.

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