Petrol prices up over testing levy dispute

On Friday, the firms increased pump prices by between Sh3 and Sh4, effectively passing on the new levy to consumers. Photo/FILE

Oil companies have increased pump prices and are withholding fuel from the market to protest at a controversial decision to increase import inspection fees by 28,000 per cent. On Friday, the firms increased pump prices by between Sh3 and Sh4, effectively passing on the new levy to consumers.

There were reports, which the Nation could not confirm, that two ships bringing in cooking gas and jet fuel have been waiting at the port since Thursday because they had not been given instructions to discharge their cargo.

Stand-off

The stand-off follows a government decision to award an Indian firm a contract to inspect imported fuel cargo. This has increased the cost of inspection from Sh7 million in 2009 to an expected Sh2 billion a year once the system becomes operational.

The tender is itself controversial, having been awarded to Geo Chem Middle East in defiance of an order stopping it by the Public Procurement Administrative Review Board.

Complaints have also been raised regarding the sharing of revenue between the Kenya Bureau of Standards (Kebs) and Geo Chem. The firm gets to keep the lion’s share. The stand-off will have an effect across the economy, with shortages already being reported at airports and petrol stations.

Oil companies are also up in arms against the selection of the Kenya Revenue Authority to collect the fee on behalf of the Kenya Bureau of Standards and Geo Chem.

Resolve the dispute

Industrialisation permanent secretary John Lonyangapuo has called a meeting today to try and resolve the dispute. Interestingly, only last week, Prof Lonyangapuo said the government was not aware of any contract to collect inspection fees on oil imports. He said he would demand an explanation from the Public Procurement Authority and Kebs.

On Friday, the Kenya Association of Tour Operators said Wilson Airport was hard hit by a jet fuel shortage, with its two main suppliers running out of stocks on Thursday. The operators are demanding that the government explain why it contracted Geo Chem even though the tender had been cancelled by the Public Procurement Administrative Review Board.

On their part, oil firms argued that the new cost of inspection will not only result in higher costs for consumers, but the fees collected will benefit a private company and not the government. They say the contract between Kebs and Geo Chem Middle East is skewed in favour of the private firm as the inspection will cost oil companies 0.675 per cent of cost insurance and freight (CIF). The firm will pay Kebs a commission of 0.2 per cent.

The oil firms now want the Kenya Anti-Corruption Commission, the Parliamentary Committee on Energy, and other government oversight agencies to investigate the deal, saying it would cost taxpayers billions of shillings. They said the inspection by the private firm would be a duplication of existing procedures conducted by the Kenya Petroleum Refineries Ltd and the Kenya Petroleum Company.

But Prof Lonyangapuo said although the process of identifying Geo Chem was not above board, the decision to contract a private company to inspect the imports was justified. “It is the intention of the government to have imported oil products inspected to determine their quality and quantity,” he said.

The PS said the government had, for a long time, relied on information provided by inspection agencies contracted by oil importers, but that it was not possible to authenticate such information. The oil firms are questioning the decision by the Kenya Revenue Authority to write to them indicating its decision to start collecting petroleum inspection fees on behalf of Kebs.

A letter written by Mrs M.W.Njuguna, on behalf of the Commissioner of Customs Services Department dated February 25, notifies the oil firms of the new changes. But the oil firms are challenging KRA’s move, saying the decision by Kebs to contract Geo Chem is illegal because the standards body allegedly has no legal mandate to carry out quantity tests under the Standards Act.

The KRA public relations manager, Mr Kennedy Onyonyi, said the revenue body has nothing to do with the controversy over the oil inspection tender. “We are not supposed to know and do not know who applied for what, where, and when. Our role in the whole process is collecting revenue,” he said. He added that the KRA’s mandate starts and ends with collection of revenue.