High kerosene prices fail to stop fuel adulteration

Rogue dealers are still blending kerosene with diesel to net super profits despite the government raising paraffin prices and cutting cost gap with motor fuel to deter the vice.

Unscrupulous traders are adulterating diesel since paraffin, which attracts lower taxes, is Sh17 cheaper per litre despite last month’s cost jump, making the practise highly profitable.

On the receiving end are motorists whose engines are jeopardised. Fuel adulteration leads to economic losses in unpaid taxes, deterioration in performance of engines and unfair competition.

In June, Treasury secretary raised the excise levy on kerosene from Sh7.21 per litre to Sh10.31 for the same volume to match that of diesel.

The Sh3 jump, however, fell short of bridging the yawning gap between the two products. This is because diesel and petrol each attract a road maintenance levy of Sh18 per litre, while paraffin does not.

“There’s still a gap between kerosene and diesel and this means adulteration is still profitable,” said Anne-Solange Renouard, the chairperson of Petroleum Institute of East Africa (PIEA) — the oil marketers lobby.

“We hope soon the level of taxes will be equal to remove the incentive.”

READ: Poor households to feel the pinch of higher kerosene prices

The PIEA reckons that 80 per cent of imported kerosene is still being blended with diesel, mostly by independent dealers.

“In a public statement from the Energy Regulatory Commission, it was confirmed that only approximately five million of the 33 million litres of Kerosene that are reported to be consumed monthly are actually used for lighting and cooking while the balance is used for adulterating diesel/petrol,” said Ms Renouard.

“This means that the taxman loses approximately Sh34 billion from tax evasion.”