Fuel adulteration involves the introduction of kerosene into petrol or diesel with the resultant mixtures sold to consumers as pure petrol or diesel respectively. Dumping on the other hand, involves the diversion of duty-exempt export fuel for illegal sale in the local market.
These malpractices are mainly carried out to take advantage of the price differential between domestic kerosene and petrol and diesel, particularly before the introduction of the anti-adulteration levy, and the zero-rated export bound petroleum fuels by selling the same as taxed local product.
Apart from loss of government revenue resulting from tax evasion, fuel adulteration has immensely contributed towards environmental pollution. It poses a threat to the health of Kenyans, led to vehicles’ engine damages, created unfair competition between oil marketing operators and resulted in loss of Kenya’s competitive advantage as the preferred import / export route for our neighbouring countries.
To tackle fuel adulteration and dumping in the country, a fuel marking and monitoring programme was started in 1998. Then, about 25 pecent of the stations tested, were found to be selling petroleum products that were either contaminated with kerosene or meant for export.
With the fuel marking and monitoring programme in place, we have witnessed a sustained decline in adulteration and dumping cases to as low as two percent for all the stations tested in the country by 2014.
Today, the Energy and Petroleum Regulatory Authority (EPRA) which is mandated under Section 92 of the Petroleum Act, 2019 to monitor petroleum products offered for sale in the local market, has further enhanced the programme and tremendous results have been achieved.
By the end of 2019, non-compliance was as its lowest at 0.18 percent down from a high of 25 percent in the early 2000s and 3.05 percent in 2013. The near 100 percent compliance levels of the programme has resulted in a remarkable increase in the number of profitable independent stations and indigenous oil marketing companies and created a level playground for all the oil marketing operators.
Additionally, there has been remarkable reduction in air pollution due to damaged vehicle engines.
To ensure that fuel adulteration is completely eradicated, the government through EPRA introduced additional measures including crackdowns on illegal fuel sites which are suspected to be undertaking adulteration and dumping of export products in the local market.
From July 2018 to date there have been continuous nationwide crackdowns and demolition of illegal fuel sites spearheaded by EPRA in conjunction with other Government Agencies.
Furthermore, in 2019, the government in consultation with policy makers and industry stakeholders, introduced the anti-adulteration levy on local kerosene. This levy removes the incentive of price differential between Domestic Kerosene and Super Petrol and Diesel. The Petroleum Act No. 2 of 2019 also introduces punitive measures for anyone found adulterating or dumping export bound fuel.
These laws and regulations are enforced by EPRA through its Enforcement and Customer Protection Directorate and regional offices across the country through regular fuel quality inspection of all the petroleum facilities for compliance.
In Early April, EPRA shut down seven petrol stations after they were found to have violated their licenses – selling diesel that had the chemical marker used on export fuel – offering diesel meant for export.
While there have been great achievements in tackling fuel adulteration, there is still a residual non-compliance on fuel dumping with compliance levels standing at 99.2% by the end of 2019. This can be attributed to the uncontrolled segment made of transporters and their drivers and the mushrooming of illegal petroleum sites.
EPRA has now embarked on a strict licensing regime of the whole fuel supply chain which includes the licensing of petroleum truck drivers and retail filling stations in order to combat this residual non-compliance. Daily inspection of filling stations has also been intensified.
These strides made so far show that achieving one hundred percent eradication of fuel fraud is possible with vigilance at every stage of the downstream process – the refineries or fuel depots, through wholesale depots and the transport network.
However, this requires participation and collaboration of all stakeholders involved in the petroleum supply chain and investing in advanced testing kits at ports, which would add another robust layer of deterrence in securing the fuel supply chain.
The writer is the Director General Energy and Petroleum Regulatory Authority.