Oil marketers paid Sh87.8bn subsidy in nine months


Trucks transporting fuel. FILE PHOTO | NMG

Treasury had paid oil marketers Sh87.7 billion by September, highlighting the Exchequer’s struggles that have led to billions of shillings in arrears owed to the dealers.

The latest Controller of Budget’s (CoB) report on budget expenditure by the national government shows that the last instalment of Sh16.6 billion was made on September 16.

Treasury has been struggling to pay oil dealers to keep pump prices low with billions of shillings needed every monthly pricing cycle, forcing the Exchequer to delay the compensation.

Oil marketers say that they have not been paid for six monthly cycles highlighting the struggles by Treasury amid debt servicing obligations that have choked other budget lines.

“The over-absorption by General Administration Planning and Support Services under the Ministry of Petroleum and Mining is attributed to the funding towards fuel subsidy released under Article 223 of the Constitution at Sh16.6 billion,” Dr Nyakango noted in the report.

This brings to Sh87.77 billion that Treasury paid oil markets in the nine months to September even as it struggles with the outstanding arrears.

Oil marketers estimate the arrears at Sh60 billion and the continued delays in State compensation signal tougher times ahead in the New Year.

Dealers, beset by cash flow woes have been forced to turn to banks for loans to finance payment of their fuel cargo imports and other day-to-day operations.

The compensation delays have hit independent oil dealers harder than the well-oil multinationals, nearly pushing them out of business.

President William Ruto had in September promised to discontinue the fuel subsidy because of its budgetary disruptions and at times leading to shortages of the very commodities being subsidised.

The new administration has since dropped the stance and instead opted to share the burden of the subsidy with petrol users amid sky-high inflation.

The State has since the monthly cycle that started on November 14 been sharing the burden of the subsidy with petrol users in a bid to ease pressure on the Treasury.

Petrol users paid Sh9.94 for every litre of diesel consumers in the November 15 to December 14 cycle with the State paying the remainder of the Sh18.79 a litre subsidy.

In the current cycle that lapses on January 14, petrol users are paying Sh8.54 per litre of diesel consumed with the government paying Sh10.85 per litre, bringing the subsidy to Sh19.39 per litre of diesel.

The fuel subsidy scheme was started in April last year by the Uhuru Kenyatta administration in a bid to cushion Kenyans given that high fuel prices significantly contribute to inflation.

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