Regulations that have previously locked out the smaller players will be revamped.
I was impressed when a group of 24 Liquefied Petroleum Gas (LPG) dealers recently formed a trade association called Energy Dealers Association (EDA). These are among the indigenous cooking gas distributors and retailers who have been collectively and unfairly labelled “illegal fillers”.
I have always maintained that these dealers symbolise the renowned and often creative Kenyan enterprise, which is often struggling to find their space in a market often tilted in favour of the larger established players. What these enterprises now need is regulatory support not condemnation. By registering as an organised group, EDA has formalised their participation in the LPG market.
It should now collectively entrench critical operating standards especially in the areas of safety and regulatory compliance. The group should rein in the “rotten apples” among them who abuse regulatory systems and exploit consumers with criminal shortcuts. Going forward, this is essential to protect the EDA brand image.
The energy regulators are currently revising LPG marketing and regulatory systems to make market entry easier, while ensuring fair competition among all players. The existing LPG pool regulations that have previously locked out the smaller players will now be revamped to improve marketing flexibility while maintaining essential consumer protection, convenience and safety.
The SMEs will significantly contribute to realisation of the government’s grand plans to make LPG available and affordable to “all households” in Kenya. There is no reason why well resourced and capitalised EDA members cannot grow into large professionally managed national brands with networks of filling plants across the country.
It is now for the government to fast-track the implementation of the national LPG master plan to enable rapid expansion of the LPG supply chain capacity. Kenya Pipeline Company (KPC) and other private sector investors are already working on increased common user imports storage capacity in Mombasa.
They should also be simultaneously targeting establishment of secondary distribution depots in Nairobi and major towns of Kenya. AGOL, a private investor in Mombasa has stabilised LPG supplies and prices through its expanded imports systems in Mombasa. The EDA members have also played a part by trucking supplementary supplies of cheaper LPG from Tanzania. However, we are still a long way to achieving optimum supply/demand logistics and economics.
The planned LPG supply chain model is expected to mirror the current petroleum products import regime with joint importation of LPG through open tender systems. Bulking up of imports allows large cargoes that create a critical mass to drive economies of scale to lower unit supply costs and final consumer prices.
This is a logistics model that will significantly multiply the current restricted annual national demand from about 200,000 tonnes to more than 500,000 tonnes in five years.
Should the LPG prices be controlled? I think the need to regulate LPG prices can be pre-empted by sufficiently expanding and liberalising the LPG supply chain and fostering free market competition. Should this fail, the energy regulators can justifiably regulate prices to protect consumers. I have previously argued that it is premature and unfair to use the kerosene tax as a weapon to fight fuels adulteration.
We should wait until most of Kenya is sufficiently outreached with the alternative of affordable LPG. Increasing kerosene prices is self-serving for the various enforcement agencies and marketers who have failed to eliminate adulteration crimes.
We must also be realistic in our attitudes and approach to biomass fuels (charcoal and firewood) which will remain in genuine demand until LPG is sufficiently available and affordable to most households. We should stop “criminalising” charcoal and instead come up with policies to commercialise, regulate, and tax a sustainable charcoal enterprise.
We have previous experiences in commercialised agro-forestry for the supply of electricity posts. This can be replicated for sustainable charcoal enterprises until we have ample capacity for LPG substitute. I challenge our environmentalists and policy makers to go out there and get a feel of the real charcoal supply/demand dynamics.
They should promote sustainable agro-forestry, and technologies for efficient and clean charcoal kilning and use. In the meantime, let us support the EDA to expand their LPG distribution capacity, while upgrading their operating standards.
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