Kenya suspends controversial oil fee

The Government has suspended the controversial fuel inspection fee that has seen a rise in pump prices, and ordered refunds of fees paid by marketers since March 1.

In a move expected to reduce fuel pump prices, Industrialisation Permanent Secretary John Lonyangapuo suspended the fees and constituted a technical committee to advice on the way forward.

The PS spoke when he met with oil firms, the Kenya Bureau of Standards (Kebs) and the Public Procurement Administrative Review Board in Nairobi on Monday.

He said suspension of the fee of crude oil and imported refined fuel will be communicated in writing to Kenya Revenue Authority (KRA), Kebs and marketers. The levy had been set at 0.675 per cent of cost, insurance and freight (CIF).

KRA started collecting fees on March 1 after a notice was issued to oil firms on February 25, 2010 by Customs Commissioner Wambui Namu.

Kebs in July 2009 contracted Geo Chem Middle East as a fuel inspector despite Public Procurement Administrative Review Board having annulled the tender.

Marketers last Friday increased pump prices to pass to consumers the fee charged by the Indian company. Kebs was to get 0.2 per cent of the money collected with Geo Chem retaining the remaining 0.4 per cent.

Escalation of Cost

On Monday, Mr Lonyangapuo said due process was not followed by Kebs in contracting of Geo Chem and the collection of inspection fees from had resulted in escalation of cost of petroleum products.

He said marketers will be refunded money which had been collected and the technical committee will carry out a study on fuel inspection with the objective of coming up with a way forward that would be acceptable to all concerned.

The Petroleum Institute of East Africa (PIEA) said in a presentation to Mr Lonyangapuo that the industry is not opposed to Kebs involvement in inspection, but it will cause duplication of work being done by SGS and Intertek.

It said SGS and Intertek, as independent surveyors, carry out tests while adhering to Kebs specifications and Geo Chem does not add value as marketers will pay over Sh2.5 billion yet they previously paid Sh8 million.

“The above does not prevent or take away Kebs mandate to carry out random testing. All associated costs of quality inspection tests are borne by importer as part of the landed product cost,” said PIEA.

Before a product is discharged the load port certificate of quality from cargo supplier duly counter signed by the surveyor must be provided along with the certificate of origin and certificate of quantity.