Oil marketers yet to be paid Sh45 billion subsidy cash


A Fuel Vessel MV Norddolphin 250m Long loaded with 85000 tonnes of Petrol from UAE offloading the precious commodity at the new Kipevu Oil Terminal in Mombasa in this photo taken on April 13, 2023. PHOTO | KEVIN ODIT | NMG

The State owes oil marketers Sh45.82 billion for the fuel stabilisation scheme that was scrapped last month amid mounting cash-flow woes for the dealers.

A communique from the Energy and Petroleum Regulatory Authority (Epra) shows that Vivo Energy Kenya, TotalEnergies Marketing Kenya and Rubis Energy Kenya— the top three oil majors— account for Sh25.67 billion or 56 percent of the unpaid money.

The fuel subsidy that had been in place since April 2021 was discontinued last month in a bid to ease pressure on the Exchequer. But the removal of the subsidy pushed pump prices to record highs.

Dealers are grappling with cash-flow woes with the small local marketers hit hardest amid fears of defaulting bank loans that were last year at the peak of the cash-flow crisis.

“The validated data of the subsidy per OMC (oil marketing company) has been forwarded to the National Treasury for action,” Epra said in the communique seen by Business Daily.

Oil marketers have since last year heavily borrowed from banks for capital outlays while several small dealers have been forced to close shop albeit temporarily.

“Many of us (local OMCs) are on the verge of collapse. We borrowed heavily from banks and we are paying interest on these loans. It shall not be late before we face the auctioneer's hammer,” a CEO of one of the small oil dealers said.

TotalEnergies, for example, disclosed it took Sh14.5 billion in short-term loans in the year ended December as the compensation delays hit the well-oiled multinationals.

Vivo Energy, which controls nearly a quarter of the local fuel market is owed by the State Sh13.45 billion followed by TotalEnergies at Sh8.16 billion and Rubis, the third biggest oil marketer (Sh4.03 billion).

Oryx Energy is yet to be paid Sh3.48 billion followed by Ola at Sh2.31 billion, Galana Oil (Sh1.24 billion) and Gapco (Sh1.01 billion).

The government has paid the 94 oil marketers Sh124.07 billion since April 2021 and settlement of the debt will bring the total payout to Sh169.89 billion.

The Treasury has reviewed the budget for the year starting next month to free up Sh25.2 billion to clear the debt under the fuel subsidy scheme.

The Exchequer has been struggling to compensate oil dealers for keeping pump prices low since 2021, prompting disquiet in the industry as dealers grapple with cash-flow woes.

The compensation delays and pressure from the International Monetary Fund (IMF) forced the government to finally abandon the subsidy.

A litre of diesel jumped by Sh6.40 to Sh168.40 while that of super rose by Sh3.40 to Sh182.70 in Nairobi in the current pricing cycle that lapses on Wednesday, June 14, 2023.

The IMF had cited the subsidy for budgetary disruptions prompting the push on the William Ruto administration to scrap the scheme.

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