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State illegally diverts fuel subsidy cash to Rerec — again
Energy and Petroleum CS Opiyo Wandayi (second left), and other officials, including Rerec CEO Rose Mkalama (right), switch on the lights during the commissioning of an electrification project in Kuresoi South, Nakuru County on November 8, 2024.
The Rural Electrification and Renewable Energy Corporation (Rerec) illegally tapped Sh110 million from the Petroleum Development Levy (PDL) in the year to June 2024, marking the latest breach in the use of the charge.
A report by the Auditor-General revealed that Rerec received the money to partly fund the connection of customers to the national grid in rural Kenya, being the second time that the State agency has illegally benefited from the PDL fund.
The law regulating PDL states that the fund shall be used for the development of the oil industry, including stabilising the local petroleum pump prices in instances of sharp upsurges occasioned by high landed costs above a threshold determined by the Energy and Petroleum Regulatory Authority (Epra).
“Review of financial records revealed that the corporation received an amount of Sh110,000,000 from the Petroleum Development Fund, which were utilised on implementation of rural electrification projects, contrary to Section 4(4) of the implementation of rural electrification projects,” Ms Gathungu said in the report.
Rerec had also illegally received Sh1.35 billion from the PDL coffers to spend on undisclosed items in the financial year that ended June 2021.
“This was contrary to Section 4(4) of the Petroleum Development Fund Act, 2012, which states that there shall be paid out of the Petroleum Development Fund such monies as are necessary for the development of common facilities for distribution or testing of oil products and matters relating to the development of the oil industry,” the Auditor-General added.
PDL is charged to consumers at a rate of Sh5.40 for every litre of petrol and diesel bought, and Sh0.50 per litre of kerosene. The collections are primarily used to subsidise fuel prices, besides funding other items in the petroleum sector.
Illegal diversion of PDL collections has depleted the fund, leaving the State with no cash to subsidise fuel prices. Consequently, consumers bear the brunt in the form of rising pump prices.
Last month, the State disclosed that it had exhausted the subsidy fund, exposing consumers to volatile global shifts that have seen the cost of fuel rise. The government has failed to apply the subsidy for two consecutive months since May.
A litre of petrol and diesel jumped by Sh8.99 and Sh8.67 respectively to retail at Sh186.31 and Sh171.58 in Nairobi, in the latest regulatory review. The price of a litre kerosene rose by a higher margin of Sh9.65 to reach Sh156.58.
This is the latest in a series of incidents where billions of shillings collected from consumers as PDL have been used for items outside the law governing the fund, triggering its depletion.
Between 2020 and 2022, the State illegally, and on different occasions, used Sh20 billion from the PDL kitty for unauthorised purposes, with Sh18.1 billion used to defray costs of operating the standard gauge railway.
Others recipients included Rerec, which received Sh1.35 billion, Ministry of Energy Sh500 million, and Sh130 million to the Nuclear Power and Energy Agency.
