State beats a retreat on petrol testing fee

The Ministry of Industrialisation on Monday suspended the controversial petroleum inspection deal that has been blamed for a sudden rise in pump prices.

Industrialisation permanent secretary John Lonyangapuo, at the same time, constituted a technical committee when he met with oil firms, Kenya Bureau of Standards (Kebs) and the Public Procurement Administrative Review Board.

Fee’s suspension

He said suspension of the fee of 0.675 per cent of cost, insurance and freight (CIF) of crude oil and imported refined fuel would be communicated in writing to collecting agency Kenya Revenue Authority (KRA), Kebs and oil marketing companies.

The PS was speaking as Energy minister Kiraitu Murungi turned the heat on the Industrialisation ministry for misleading the ministry into approving the deal.

The suspension came on the same day the Daily Nation exclusively reported how the new inspection requirement imposed by Kebs was pushing up prices.

Mr Murungi said the ministry was made to believe the rise in pump prices after the new inspection contract would not exceed 25 cents a litre. By Friday, however, oil firms had raised prices by between Sh3 and Sh4 as others hoarded oil.

Mr Murungi said the government will revisit the proposal for price controls on pump prices despite the National Economic and Social Council — which advises the government on key policy matters — rejecting it last year.

Speaking on Monday on the sidelines of a geothermal workshop in Nairobi, the minister said Kebs’ involvement was for reasons of having an independent inspector.

“The impression we were given was that the rise in cost of oil would be marginal. We were surprised that oil companies are charging upwards of Sh4 instead of the agreed 25 cents as a result of the inspection levy… We think somebody is taking advantage of the situation,” he said.

Energy ministry on Monday threw back the ball to the Industrialisation ministry as the deal began to generate heat among players and ordinary consumers. The PS announced the suspension shortly after.

“The matter is domiciled at the Industrialisation ministry and we expect they will call all stakeholders to determine who is cheating,” Mr Murungi said.

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

Kebs, in July 2009, contracted Geo Chem Middle East as a fuel inspector although Public Procurement Administrative Review Board had cancelled the tender.

Mr Lonyangapuo said Kebs did not follow due process in contracting Geo Chem and the collection of inspection fees had raised the cost of petroleum products.

Marketers will be refunded the money that had been collected and the technical committee will carry out a study on fuel inspection to come up with an acceptable way forward, the PS said on Monday.

Duplicating work

Petroleum Institute of East Africa (PIEA) said in a memo to Mr Lonyangapuo that the industry was not opposed to Kebs’ involvement in inspection, but it would mean duplicating the work being done on behalf of oil firms by private contractors SGS and Intertek, which carry out tests according to Kebs specifications.

Instead, oil marketers would pay more than Sh2.5 billion for inspection a year, up from the current 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.

Total Kenya’s managing director Felix Majekodunni represented all members in his capacity as chairman.

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 certificates of origin and of quantity.

Kenya Petroleum Refineries and Kenya Pipeline Company verify product quality test. Legal notice No.142 of September 2009 fixed 0.675 per cent of CIF as inspection fees to be levied by Kebs.