Kenya could soon go back to the fuel shortage last witnessed in May if the government of the East African nation does not clear the rising debt owed to suppliers.
According to a report filed by Kenya Star, a top official of one of the major oil suppliers in the country has said oil suppliers were considering holding stock pending clearance of almost Sh11 billion (US$91,784,000) they are seeking from the government.
“The business is not making sense anymore. Arrears arising from the subsidy plan are unsustainable. We are forced to borrow to sustain operations,” the top official said as quoted by Kenya Star.
The top official is said to have added that arrears have been accumulating since June and efforts to follow up on payments were complicated by the recent general elections.
“We fear that the transition, following the election of the new government, will worsen the situation to our disadvantage,” he added.
On Friday, the Petroleum Outlets Association of Kenya (POAK), a body that brings together all operators in the sector, hinted at supply disruption, indicating that suppliers have run out of funds.
“The Petroleum Industry is owed more today than ever…a bill of Sh65 billion (US$542,360,000). This is a sizable percentage of the industry’s market cap and large enough to cause supply disruption,” POAK said in a tweet.
The lobby added that suppliers are in extreme dilemma fueled by government transition, product availability and cost.
“Both the National Treasury, the Ministry of Energy and the Energy and Petroleum Regulatory Authority (EPRA) did not respond to our inquiries about the status of the subsidy plan and repayments to suppliers.”
The government and fuel suppliers have been in a hot and cold relationship since the introduction of the fuel subsidy plan, leading to a countrywide shortage in April.
Delays in the payment of subsidies to the companies by the government pushed up prices in the wholesale market where oil majors resold fuel to the smaller independent fuel retailers who control 40 per cent of the market.
This saw the small retailers hesitate to buy the costly fuel, with the increased supply of oil majors unable to plug the deficit.
The oil majors are also cautious to increase supply, uncertain about whether the state would compensate them for fuel not used to calculate the monthly price adjustments.
Both the government and international bodies like the International Monetary Fund (IMF) have questioned the sustainability of the oil subsidy.
Source: https://energynewsafrica.com
