The government’s decision to increase kerosene prices by Sh18 per litre in an attempt to curb fuel adulteration and raise more revenues may have hit a snag, according the latest data.
Kerosene, blamed as the key adulterant used by a cartel operating in several parts of the country, recorded close to a 40 per cent drop in sales in the month of September when the levy was loaded on pump prices.
Diesel sales plunged 24 per cent, selling 58 million litres less.
The Sunday Nation exclusively obtained the sales data, which was later corroborated by figures from the Energy Regulatory Commission, showing a drop in the volume of sales for both kerosene and diesel.
This has punched holes in the government narrative that over 80 per cent of kerosene brought into the country was being used to adulterate diesel.
A well-placed source at the Ministry of Petroleum and Mining, who did not wish to be named due to the heat generated by the fresh figures, said ministry strategists have been forced back to the drawing board to seek an alternative proposal for dealing with adulteration and easing the cost burden on households that depend on kerosene for fuel.
“If diesel sales had gone up, then it would imply that with less kerosene being bought, adulteration has dropped and now the pure diesel is being sold at higher volumes. Diesel is used by very many machines and so a drop in its sale when we thought we had dealt with the adulterant is shocking,” the source said.
The lower sales volumes now mean the Treasury should start looking elsewhere for the anticipated Sh9.8 billion it had hoped to collect from sales of kerosene, which is now expected to suffer a further cut in sales.
The move to raise tax on kerosene was premised on the idea that apart from discouraging adulteration, the government would be able to collect more money from the sale of both diesel and kerosene, while low-income households would enjoy a government subsidy on cylinder prices to adopt clean energy as Kenya phases out the use of kerosene for cooking.
The Sh3 billion plan has since been abandoned, as a crafty cartel is said to have hijacked the low-cost cylinders and sold them to illegal refillers.
The government later blamed manufacturers for supplying substandard cylinders under the National Oil Corporation Scheme even as a consumer lobby group took it to court.
ERC Director-General Pavel Oimeke, who had earlier maintained that only five million of the 33 million litres of kerosene that is reportedly consumed monthly is used for lighting and cooking while the balance is used in adulterating diesel, disputed the impression created by the new statistics, claiming diesel sales had increased instead.
“Kerosene has dropped and this has been [taken] up by [an] equivalent increase in diesel and petrol,” Mr Oimeke wrote in a short text message. He later sent a parallel set of data, which still confirmed that kerosene sales had dropped without a corresponding increase in diesel sales volumes.
His data that details what each dealer sold shows that kerosene sales dropped by some 8.8 million litres, while diesel recorded a 58 million drop between August and September.
The Treasury had hoped to collect billions from the increased prices over and above the Valua Added Tax on petroleum products, which started in September. The trend may now force it to change tack.
Data collected from pipeline throughput volumes show that September sales for kerosene dropped by 2.8 million litres from the 27.1 million litres sold in August before the Sh18 per litre kerosene adulteration tax was introduced.
Diesel, which would naturally rise in sales after the fall in kerosene volumes, dropped by 36 per cent in September from the 221 million litres sold in August.
The government had hoped to collect more revenues from boosted sales in diesel, which was losing sales volumes from the illegal business where traders mix kerosene and diesel to reap huge margins.
The practice, which was rampant in Nairobi’s industrial area, where several fuel depots are located, has been a potential fire disaster apart from damaging engines and risking Kenya’s fuel export market share.
Consumer Federation of Kenya Secretary-General Stephen Mutoro said the revelations by the latest sales volumes for kerosene and diesel may be an indicator that the regulators used the wrong figures to push for the increase in kerosene price to “punish the poor.”