Auditor-General flags Sh5.3b paid to oil firms
A special audit by Auditor- General has raised concerns over an advance payment of Sh5.32 billion to oil marketing firms for fuel price stabilisation, citing the lack of a legal framework for such payments.
In addition, the audit report reveals that there is no evidence of recovery of this advance payment in subsequent payments made to the Oil Marketing Companies (OMCs), an issue that has raised concerns about the transparency and accountability of these transactions.
Auditor-General Nancy Gathhungu said in addition to the concerns, an amount of Sh2.2 billion was also paid as administration costs for the period ending June 30 2023, indicating that there was no justification for including these stabilization administration costs in the pump price build-up.
According to Gathungu, the audit revealed that consumers bore approved demurrage charges through pump price adjustments, primarily caused by scheduling inefficiencies, ullage constraints at Kenya Pipeline Company facilities and changes in vessel arrival dates by importers, potentially failing to shield them from high fuel prices.
“Review of records confirmed that the vessels that docked at the port attracted demurrage charges amounting to Sh3,182,427,410, which were passed on to the customers through pump prices.
The stabilisation programme may have been hampered by avoidable additional cost which were passed on to the consumers and may not have cushioned the citizens from the high pump prices,” Gathungu said.
The special audit was ordered by the National Assembly’s Public Accounts Committee in April, to scrutinise financial records for the State Department of Petroleum during the financial years 2020/21; 2021/22 and 2022/23. The review revealed that an amount of Sh139.1 billion was incurred in the fuel subsidy programme.
The Government introduced the subsidy in April 2021, to protect consumers from escalating fuel prices in the wake of global economic recovery post-Covid-19, with the implementation in the petroleum pump pricing cycle beginning on April 15, 2021.
Latest statistics by the Energy Petroleum and Regulatory Authority (EPRA) indicates that demand for petroleum products remained consistent throughout the financial year ended June 30, 2023, with a peak consumption occuring in March 2023, a month that also recorded the highest demand for automotive gas oil.
During the financial year under review, EPRA said 9,212,196.87 Cubic meters were imported through both Open Tender System and the Government to Government framework (G2G). The G2G framework was introduced in April 2023 with the objective of easing pressure on the demand for US dollars thus improving its circulation and subsequently mitigating the depreciation rate of the Kenyan Shilling.
A total of 1,945,054.91 Cubic Meters of petroleum products has been imported between April and June 2023under the G2G framework.
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