Investors will be required to have a minimum of 30,000 cylinders as a prerequisite for a Liquefied Petroleum Gas (LPG) dealership, in new changes aimed at weeding out cartels and middlemen from the sub-sector.
Currently, an investor requires a minimum of 5,000 LPG cylinders to enter the business but the Energy and Petroleum Regulatory (Epra) now seeks to raise this six-fold to help deal with complaints by a section of industry investors that some middlemen were hijacking their equipment to profiteer.
The proposal, contained in the Petroleum (Liquified Petroleum Gas) Regulations of 2024, is set to take out cartels or middlemen who lack the funding muscle to maintain the new minimum stock threshold.
Consumption of cooking gas has maintained a steady rise in the past few years, with 414,880 tonnes used last year, a 15.1 percent rise from 360,590 tonnes bought by homes, businesses and institutions in 2023.
The energy regulator reckons that cartels and middlemen continue to infiltrate the booming business, unfairly edging out brand owners and investors besides heightening the risk levels to consumers.
“A brand owner shall own a minimum of 30,000 LPG cylinders of either standard capacity,” the regulations read.
“There is a tendency to have undercutting businessmen and women into the market, who end up cross-filling or even disappearing with other people’s brands hence cannibalising other investors’ for their own gain,” a government official in the energy sector said.
Kenya’s cooking gas sector is laden with rogue dealers mostly in the urban areas, who illegally refill cylinders from other brands without their consent. Most of the cooking gas bought from these dealers has been blamed for a spate of leaks and explosions at homes.
Licensed dealers and oil marketers also continue to decry a thriving black market which besides plunging them into revenue and cylinder losses, also heightens the risk exposure to consumers.
Dealers and oil marketers with less than 30,000 cylinders at the time of coming into force of the new regulations will be required to progressively build their stock within three years.
The new requirement will replace the minimum stock threshold that has been in place since 2019, as Epra seeks to put in place regulations that mirror the steady growth in the sector.
Consumption of cooking gas is set to remain on the rise in the coming years on the back of a combination of government and private sector efforts.
The government removed the eight percent Value Added Tax, 3.5 percent Import Declaration Fee, and the 2.5 Railway Development Levy on cooking gas two years ago to lower prices of the commodity and spur its consumption.
However, the removal did little to benefit consumers with the 13-kilogramme cooking gas going for an average of Sh3,146.03 last month compared to Sh2,787.83 in June 2023 before the taxes were removed.
Besides the tax removal, other key factors like the exchange rate of the shilling to the dollar also stabilised over the last two years meaning that prices of cooking gas should have further dropped.
Removal of the taxes is in addition to a number of local and foreign investors pushing to set up facilities to handle imports of cooking gas that are key to boosting consumption of LPG.
Some of the foreign investors include Tanzanian tycoons, Ally Edha Awadh who owns Lake Oil, and Rostam Aziz, the owner of Taifa Gas.
Nigeria’s Asharami Synergy is in advanced talks with Kenya Pipeline Company and the government to fund the construction of a Sh17.7 billion cooking gas handling facility on land owned by Kenya Petroleum Refineries Limited in Changamwe.
