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Taxpayers lose Sh870 million in botched cooking gas subsidy plan

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Kenyan taxpayers lost more than Sh870 million in the botched Ministry of Petroleum’s plan to provide poor homes with cheaper cooking fuel. FILE PHOTO | NMG

Kenyan taxpayers lost more than Sh870 million in the botched Ministry of Petroleum’s plan to provide poor homes with cheaper cooking fuel, a new audit has shown.

The audit says taxpayers did not get value for money arising from shortcomings in the implementation of the Mwananchi Gas Project.

Under the plan, which was already piloted in Machakos and Kajiado counties, the government was expected to buy about one million new gas cylinders and cookers for distribution.

Poor households were to receive 6kg cooking gas cylinders and burners at a discounted price of Sh2,000, as opposed to the market cost of similar cylinder with cooking accessories which goes for about Sh5,000.

"The project has not attainted its intended purpose and further, value-for-money has not been obtained on expenditures totalling Sh870,339,283 incurred on the project as at June 30, 2018.

"In addition, the status of the project remains unclear as its implementation appears to have stalled," Auditor-General Edward Ouko says in the report.

Subsidy plan

The subsidy plan was aimed at cutting reliance on kerosene and charcoal, which are not environment-friendly but are the main source of fuel for most rural and urban poor households.

The auditor notes that contracts were awarded on the basis of un-enforceable performance bonds and with no performance durations.

Some contractors however delivered sub-standard cylinders whose valves were prone to fire hazards.

The project entailed the supply and distribution of LPG cylinders, grills and burners to households at subsidised prices and erection of facilities to store the cylinders at local distribution points.

The audit shows that ten firms were contracted by the ministry in May 2017 to supply various components of the LPG gas project at an aggregate cost of Sh1 billion.

Mr Ouko says the State department for Petroleum had spent a total of Sh870 million as at end of June 2018.

The Ministry has since paid out Sh481 million leaving a pending bill of Sh389 million.

The contracts with the 10 suppliers would have seen the supply and distribution of 357,355 gas cylinders, 357,355 grills and a similar number of burners in addition to forty-foot containers.

Not supplied

Mr Ouko, however, says 206,587 gas cylinders, 84,788 grills and 97 forty-foot containers had not been supplied as at April 1, 2019.

"Further, out of the 150,668 cylinders supplied, only 66,103 had been inspected and an undisclosed number distributed to consumers in two counties.

"An estimated 88,565 cylinders were held at the National Oil Corporation (Nock) stores in Nairobi pending inspection and certification for conformity with the supply requirements," the audit shows.

One of the two suppliers contracted to supply 148,898 cylinders delivered only 23,873 in July 2017 at a cost of Sh52.5 million but 15,350 of the cylinders (about 64 per cent) were found to be faulty.

The faulty ones were estimated to cost valued at Sh33.8 million. Mr Ouko said attempts by the Ministry to enforce the performance bond worth Sh40.34 million provided by the supplier were unsuccessful.

The performance bond was not of first-demand category and therefore did not cover liability for the faulty supplies.

"In the circumstances, the sum of Sh30.75 million paid to the supplier for faulty cylinders is at risk of loss as it was not secured," Mr Ouko said.

The Consumer Federation of Kenya has filed a suit in court over the botched deal.