In Nine Months, Oil Merchants paid a Subsidy of Sh87.8 billion

The Exchequer’s difficulties have resulted in billions of shillings in arrears owed to the dealers, yet by September, Treasury had paid oil marketers Sh87.7 billion, underscoring the difficulties.

According to the most recent Controller of Budget (CoB) report on national government budget expenditures, the final payment of Sh16.6 billion was made on September 16.

The Exchequer has been forced to postpone payment because Treasury has struggled to pay oil dealers the billions of shillings required for each monthly pricing cycle in order to maintain low pump prices.

Oil marketers claim that they haven’t received payment in six monthly cycles, underscoring Treasury’s difficulties in meeting debt service obligations that have clogged up other budgetary lines.

“The funds towards gasoline subsidy given under Article 223 of the Constitution at Sh16.6 billion is ascribed to the over-absorption by General Administration Planning and Support Services within the Ministry of Petroleum and Mining,” Dr. Nyakango observed in the report.

In spite of its challenges with the outstanding debts, Treasury still paid oil markets Sh87.77 billion in the nine months leading up to September.

The arrears, which the oil industry estimates to be around Sh60 billion, plus the ongoing State compensation delays indicate that the coming year will be more difficult.

Due to their difficulties with cash flow, dealers are now compelled to turn to banks for loans in order to pay for their gasoline cargo imports and other daily activities.

Independent oil dealers have been impacted more severely by the settlement delays than well-oil corporations, almost driving them out of business.

Since then, the new administration has changed its position and decided to split the cost of the fuel subsidy with consumers in the face of exorbitant inflation.

In an effort to relieve strain on the Treasury, the State has been splitting the cost of the subsidy with petrol consumers since the monthly cycle began on November 14.

In the cycle from November 15 to December 14, consumers of diesel who used gasoline paid Sh9.94 for each litre, with the State covering the remaining Sh18.79 of the subsidy.

In the current cycle, which ends on January 14, consumers of gasoline pay Sh8.54 for each litre of diesel they use, with the government contributing Sh10.85, making the subsidy Sh19.39 per litre of diesel?

The Uhuru Kenyatta administration launched the fuel subsidy program in April of last year in an effort to provide relief for Kenyans given the considerable contribution that high fuel costs make to inflation.