Oil marketers have warned of mounting cash flow woes over the fuel stabilisation scheme that was extended in the new prices for the monthly cycle ending February 14.
The Energy and Petroleum Regulatory Authority (Epra) last Sunday cross-subsidised the prices of diesel, adding to the Sh9.98 billion in unpaid dues under the scheme since July last year.
The cross-subsidy helped lower diesel prices by Sh5 per litre, with the commodity going for ShSh196.47 in Nairobi.
Compensation delays have forced oil marketers to tap more loans for capital outlays, highlighting the impact of the payment hitches on their operations.
“Our biggest worry now is the extension of the scheme yet they owe us money, the same issues like in 2022 are slowly coming back. We are slowly sliding back to distress,” an executive who sought anonymity said.
“It is inevitable that the industry, starting with the small and independent dealers, will sink into cash-flow problems if the subsidy is applied,” said another executive.
In 2022, several locally owned oil firms shut at the peak of the cash-flow woes when the Treasury delayed paying the industry more than Sh60 billion that had accumulated since the start of the fuel stabilisation scheme in April 2021.
The compensation delays were also blamed for industry disquiet in April 2022, leading to a shortage of the critical commodity countrywide.
The government floated a three-year bond in two tranches in June and July last year to clear the balance of Sh45 billion of unpaid subsidy amid struggles by the Treasury to raise the cash.
The executives argue that the State ought to have discontinued the subsidy given the global drop in prices of refined fuel, which has in turn reduced the need to stabilise the prices.
The Epra opted to cross-subsidise diesel and kerosene using super, in a bid to progressively ease pressure on the Exchequer overcompensation of oil marketers to keep pump prices low.
“The price of diesel has been cross-subsidised with that of super petrol and in order to further cushion the economy, the government has opted to stabilise the resultant diesel price,” the Epra said in the new pricing schedule.
The Treasury has been struggling to compensate oil marketers under the scheme, which prompted a shift to cross-subsidise the commodity-using petrol consumers.
This, however, denied consumers of super petrol a bigger drop in the latest pricing schedule even as the cost of a litre of the commodity fell to Sh207.36 from Sh212.36.
President William Ruto’s administration had initially discontinued the stabilisation scheme in the early months after coming to power in September 2022 but made a U-turn after pump prices soared past the Sh200-a-litre mark for the first time in Kenya’s history.
