Treasury owes oil marketers Sh39 billion in subsidy cash

Trucks transporting fuel wait for their turn to be transshipped accross Likoni ferry channel to the mainland Likoni. PHOTO | LABAN WALLOGA | NMG

The State owes oil dealers Sh39.56 billion for keeping pump prices unchanged since June, according to documents seen by the Business Daily.

The oil marketers are claiming the largest amount for diesel sales at Sh25.28 billion while that for super is Sh12.9 billion and kerosene at Sh1.46 billion.

Kenya has come under pressure from the International Monetary Fund (IMF) to scrap the subsidy scheme and end the current situation where the government allocates billions of shillings monthly to pay dealers.

The arrears are for the June-July and July-August monthly reviews and further worsen cash-flow hitches for oil dealers, especially the independent marketers that rely on bank credit to pay for their fuel quotas.

Treasury and the department of Petroleum — the two agencies in charge of the scheme declined to comment on when the arrears will be paid with less than two weeks to the monthly review.

“The arrangement with oil dealers is managed by PS Petroleum. Please reach out to him,” Treasury PS Julius Muia told the Business Daily when asked to respond on when the money would be paid.

The petroleum department had declined to comment on the payment plan and referred Business Daily to Treasury, highlighting why the fuel subsidy has become a headache for the government.

Oil dealers are grappling with worsening cash flows amid the high costs of crude in the global market amid fears that the small dealers are slowly being forced to close.

Marketers hoarded fuel in April to protest delayed compensation leading to a nationwide shortage that threatened to cripple the economy.

The government has been spending an average of Sh7.65 billion every month to subsidise fuel and contain public outrage over the high cost of living, highlighting the adverse impact of the subsidy on the country’s revenues.

Removal of the subsidy is one of the conditions from the IMF under a Sh270.2 billion ($2.34 billion) budget support scheme that will run for 38 months.

A litre of super and diesel retails at Sh159.12 and Sh140 respectively in Nairobi in the current cycle lapsing on August 14.

Without the subsidy, the prices would have been Sh209.78 per litre of super and Sh193.7 per litre of diesel.

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