Friday, May 27, 2022

State defaults on billions it owes local oil dealers for subsidized fuel prices

The government has defaulted on payment of billions of money it owes local oil dealers. The billions are compensation for the subsidized fuel prices that have not been increased over the past few months to avert protests from consumers.

Reports say that the government has not paid oil sellers anything for the December 2021 to January 2021 review. Estimates show that the government owes oil marketers up to Sh. 8.12 billion for the this review period. Following this default, the oil marketers now want the State to pay the money with interest.

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“We are in a crisis. We were partially paid for the November-December cycle and nothing has been paid for the review ending today. If the government delays payment by over three months then that means marketers are in serious trouble, some of the financing comes from banks; do you think they care if you have been paid or not?” a local daily quoted one of the top oil executives.

The Energy and Petroleum Regulatory Authority (Epra) cut margins for the oil marketers to keep pump prices unchanged and contain public outrage. In the current review, it is supposed to compensate marketers at Sh. 18.32 per litre of Super, Sh. 21.89 per litre of diesel and Sh. 23.53 per litre of kerosene. This compensation is supported by billions of shillings raised from fuel consumers through the Petroleum Development Levy. This Levy was increased to Sh. 5.40 a litre in July 2020 from Sh. 0.40, representing a 1,250 per cent rise. The fund is meant to cushion consumers from volatility in fuel prices but it will also see motorists lose out when paying the Sh. 5.40 for a litre at the pump.

With the delay in payments, all eyes will now be on the government as the monthly fuel review falls due on January 14, for the January – February period.

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