Treasury Yet To Pay Sh39 billion Subsidy To Oil Marketers

According to a recent report, the State owes oil traders Sh39.56 billion for maintaining the same pump pricing since June. 

Diesel sales are valued at the most by oil marketers at Sh25.28 billion, followed by super at Sh12.9 billion and kerosene at Sh1.46 billion. 

The International Monetary Fund (IMF) has put pressure on Kenya to discontinue the subsidy program and the existing situation in which the government allots billions of shillings each month to compensate dealers.

The arrears are for the monthly reviews for the months of June-July and July-August, and they make cash flow problems for oil dealers much worse, especially for independent marketers who depend on bank credit to cover their fuel quotas. 

With less than two weeks until the monthly review, Treasury and the department of Petroleum—the two organizations in charge of the scheme—refused to comment on when the arrears will be paid.

“The arrangement with oil dealers is managed by PS Petroleum. Please reach out to him,” Treasury PS Julius Muia said 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.