Treasury allocates Ksh.1.4 billion for fuel price stabilization


Treasury allocates Ksh.1.4 billion for fuel price stabilization

In Summary

  • The monies cited in the second 2020/21 supplementary budget estimates have since been deployed in the compensation of oil marketers as payments for haircuts taken to cushion Kenyans from higher fuel prices.
  • Already, the oil marketing companies (OMCs) have seen their supplier margins across April and May trimmed to hold further fuel price increments to Kenyans.
  • However both the National Treasury and the Petroleum Ministry are tapping to the scheme without there being regulations to govern the relief mechanism making this actions technically illegal.

The National Treasury has set aside Ksh.1.4 billion for the operations of the fuel price stabilization mechanism.

The monies cited in the second 2020/21 supplementary budget estimates have since been deployed in the compensation of oil marketers as payments for haircuts taken to cushion Kenyans from higher fuel prices.

Already, the oil marketing companies (OMCs) have seen their supplier margins across April and May trimmed to hold further fuel price increments to Kenyans.

However both the National Treasury and the Petroleum Ministry are tapping to the scheme without there being regulations to govern the relief mechanism making this actions technically illegal.

Already players from the auto industry such as the Motorist Association of Kenya (MAK) have decried opaqueness in recent fuel price adjustments.

While the Petroleum Ministry and the Energy and Petroleum Regulatory Authority (EPRA) had remained silent on the operation of the scheme, the government has now made the admission of deploying the fund to cushion consumers.

“The price stabilization mechanism has been there for a while, it’s just the regulations that need to be put in place. In the meantime, there has been a stop gap (to fuel prices),” Principal Secretary in the State Department of Petroleum Andrew Kamau told Citizen Digital in a phone interview on Friday.

The effect of the stabilization mechanism can be seen in the movement, or the lack of it in maximum pump prices by EPRA across the last two months.

For instance, EPRA held off further increases in fuel costs across April after trimming margins to suppliers.

The margins were nevertheless restored for petrol supplies ending in the one sided jump to petrol prices in May.

The Petroleum Ministry is unfazed by the probability of legal suits challenging the operation of the fund in court as it concludes prerequisite regulations.

“Its fine, somebody can challenge it and then he or she can explain to the over 40 million Kenyans on why they should be paying more for fuel,”PS Kamau added.

Mid last year, the Petroleum Ministry raised the petroleum development levy paid by diesel and petrol consumers by Ksh.5 as part of the initial stages of creating the stabilizing mechanism.

New regulations are expected to pin guidelines on the effective application of the fund. Currently, the mechanism governing the use of the fund remain in discrete.

For instace, Kenyans could see a hold in petrol costs on Monday should the Ministry of Petroleum and EPRA tap from the fund again.

Fuel prices would be traditionally expected to go up on a hike to international crude prices in the last two months.

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Story By Kepha Muiruri
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