Oil marketing companies in Kenya will be paid subsidy arrears amounting to Ksh13 billion (about $113 million) by Tuesday to end the ongoing fuel shortage crisis, Petroleum Principal Secretary Andrew Kamau has said.
PS Kamau, in an interview with NTV on Sunday, said the oil firms would be paid this week even as he strongly defended the sustainability of the fuel subsidy scheme that has been blamed for the current crisis.
“It is about Ksh13 billion (the amount of money owed to oil companies), which I suspect will be paid either by Monday or Tuesday,” he said.
The subsidy, the PS said, was crucial in stabilising fuel prices for Kenyans after last month’s reviews and without it the prices would have reached new record highs.
The scheme is supported by money from the Petroleum Development Levy Fund (PDLF), which receives Ksh5.40 ($0.047) for each litre of petrol and diesel sold, which was increased from Ksh0.40 ($0.004) in 2020.
“As a government, we really don’t have a choice but to take care of our citizens. But is this (fuel subsidy) sustainable? It has to be sustainable,” said the PS, even as he revealed the kitty is left with only about Ksh4 billion ($34.8 million).
“The increase in the Petroleum Development Levy gives us optionality. If we did not put that Ksh5 ($0.043) back then because we did not know how Covid-19 would pan out, now we are giving that money back to you because it is your savings,” he said.
He cited Western Kenya as the region most affected by the fuel shortage because there are fewer independent oil marketers operating there.
Many parts of the country have been hit by a biting fuel shortage over the past week owing to the government’s delay in releasing subsidy cash owed to oil companies.
To keep fuel prices stable, the government cut marketers’ margins to zero, meaning they sell their fuel stocks and wait for more than a month to be reimbursed, leaving them with a biting cash crunch.
This has seen many oil firms divert their fuel from the local market to Kenya’s neighbours, where they receive cash up front. Others have resorted to hoarding the product, leaving local petrol stations dry.
Mr Kamau said the fuel shortage will be resolved “this week”.
“It is a pity that we have decided to have a run on the stations but once everyone has filled their cars and jerry cans, I suspect by Wednesday the stations will have fuel but they will have no queues,” he said.