Auditor-General Nancy Gathungu has revealed that some undisclosed firm, the Rural Electrification and Renewal Energy Corporation, Ministry of Energy, Nuclear Power and Energy and Kenya Energy Sector-Environment and Social Responsibility Programme were the beneficiaries of the latest diversion.
The report says that no documents were tabled to the Auditor-General to show how the funds were used by the agencies and the private company.
The PDF Act of 1991 requires that the fund be used to support a subsidy when fuel prices rocket and infrastructure upgrades in the petroleum sectors, making last year’s transfers illegal.
The Treasury has once again diverted Sh2.074 billion from the Petroleum Development Fund (PDF) to other State agencies in breach of the law, draining cash meant for cushioning consumers against high fuel prices.
Auditor-General Nancy Gathungu has revealed that some undisclosed private firm, the Rural Electrification and Renewal Energy Corporation, the Ministry of Energy, the Nuclear Power and Energy Agency and the Kenya Energy Sector-Environment and Social Responsibility Programme were the beneficiaries of the latest diversion.
The report says that no documents were tabled to the Auditor-General to show how the funds were used by the agencies and the private company.
The Rural Electrification and Renewal Energy Corporation was the biggest beneficiary of the latest diversion at Sh1.359 billion followed by the Ministry of Energy at Sh500 million.
The Nuclear Power and Energy Agency received Sh130 million, the Kenya Energy Sector-Environment and Social Responsibility Programme got Sh50 million while the unnamed firm pocketed Sh35 million.
“The fund management transferred a total of Sh2.074 billion to various government agencies and one private entity which have no responsibility in the oil and petroleum industry,” Ms Gathungu says in her review of the use of the PDF in the period ended June last year.
“In the circumstances, the propriety and validity of transfers to other government entities of Sh2,074,000,000 and Sh35,000,000 transferred to a private entity for the year ended June 2021 could not be confirmed and management was in breach of the law.”
The PDF Act of 1991 requires that the fund be used to support a subsidy when fuel prices skyrocket and infrastructure upgrades in the petroleum sectors, making last year’s transfers illegal.
The fund is a special scheme created to shield consumers against high costs of fuel and is supported by the petroleum development levy, which was increased to Sh5.40 a litre in July 2020 from Sh0.40.
The diversion piled more pressure on the fuel subsidy scheme as the government has since last year grappled with a lack of funds to fully compensate oil marketers for keeping pump prices unchanged.
The subsidy was meant to cushion motorists from rising global fuel prices on the back of a speedier than expected economic recovery as vaccines are rolled out.
Without the subsidy, super petrol would have hit a historic high of Sh144.47 a litre from the current Sh129.72, diesel Sh128.44 a litre from Sh110.6 and kerosene Sh123.77 from Sh103.54 a litre in what would have reignited public anger over high cost of living.
Oil dealers who sought anonymity for fear of State reprisal have been complaining that the State has not compensated the full costs incurred in the importation of fuel.
The Treasury manages the PDF but lawmakers are currently debating proposed changes to laws governing the petroleum industry that will among others establish an independent body to manage the fund.
Parliament is expected to scrutinise the Auditor-General’s report on the use of the PDF in the coming weeks in what is likely to spark a fresh battle between lawmakers and Treasury officials.
MPs last year directed the Treasury to compensate motorists for the Sh18.1 billion that had been diverted to fund the operating costs of the standard gauge railway (SGR).
The Treasury told Parliament that diversion of the funds depleted the fund, leading to discontinuation of the fuel subsidy scheme in the monthly review to October 14 last year.
The subsidy was restored in the monthly review ending November last year but at a cost to oil marketers who are grappling with delayed compensation.
Pump prices have a direct impact on the cost of living given that the Kenyan economy is diesel-driven and manufacturers and farmers pass the increase in costs to consumers.
Kenya started stabilising fuel prices in the monthly review ended April last year but the subsidy scheme has faced cash-flow hitches attributed to illegal diversions of cash meant to compensate the oil marketers.
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