The State owes oil marketers Sh9.98 billion for the fuel stabilisation scheme that was reinstated from July, amid industry disquiet of mounting cash flow hitches.
Data from the Ministry of Energy shows that the billions are due for four monthly cycles including the one lasting from November 15 to December 14.
Industry players, notably the locally-owned oil marketers, have warned that they are slowly sinking into a biting cash flow due to the delayed payments as they grapple with increased costs of buying refined fuel.
The compensation delays, coupled with a sharply weakening shilling against the dollar and a global rally in fuel prices, are further piling pressure on already strained cash-flows.
“OMCs, especially the small ones, are slowly sinking into distress. Product prices have also been high and there is also the element of the LCs (Letters of Credit) under the government to government fuel deal,” said a CEO of one of the local oil firms.
Compensation for the monthly pricing cycle lapsing tomorrow accounts for the highest share at Sh6.27 billion followed by that for the monthly cycle that ended on September 14, at Sh1.78 billion.
A sharply weakening shilling against the dollar, coupled with the rise in cost of imported fuel between June and September has worsened the situation for the OMCs.
The landed cost of super petrol jumped 23.4 percent to Sh123,387 ($805.14) per cubic metre in October from Sh99,945 ($691.76) per cubic metre in June while that of diesel rose 33.2 percent to Sh129,606 ($845.72) per cubic metre from Sh97,255 ($673.14) for the same quantity in the same period.
The Ministry of Energy has not however disclosed when it plans to settle the billions owed to the OMCs.
“There were witnessed delays in remitting the subsidy payments to the OMCs leading to cash-flow constraints and payments arrears that in turn had a negative effect on the security to supply petroleum products,” the ministry says.
The government in May floated a bond in two tranches to settle some Sh45 billion it owed OMCs for keeping pump prices low in the financial year that ended in June.
OMCs including the well-oiled multinationals had been forced to tap bank loans to finance operations and pay for fuel imports amid compensation delays stretching over a year.
Industry players have raised concerns of a return of the scenario amid delays in paying the Sh9.98 billion.
Compensation delays were also blamed for the countrywide fuel shortage that rocked Kenya in April 2021 as OMCs silently protested.
The government did not stabilize pump prices for the September to October cycle, a move that saw a litre of super petrol and diesel hit Sh211.64 while Diesel Sh200.99.
Prices further rose to Sh217.36 and Sh203.47 per litre of super petrol and diesel respectively in the cycle ended November 14 despite application of the stabilisation kitty.
Application of the stabilisation kitty prevented prices from hitting a historic high of Sh229.37 and Sh223.29 per litre of super petrol and diesel respectively in the current cycle as eyes turn to the government ahead of the new prices to be announced on Friday.
