Watts Up Magazine wattsup magazine online | Page 11

Dumping
Adulteration of fuel is such a lucrative business in the
country, something that has left many wondering what
action the government needs to take to tame the vice.
The key factors, as Mr. Kinyua observed, include export
dumping which contributes highly to oil smuggling.
Dumping refers to offloading fuel meant for export
and selling it in the local market. While the export
fuelattracts no taxes, it has provided an incentive
to illegal traders to set up dens across the country’s
highways. The 50 percent margin difference that export
fuel attracts is such a sweetener. This is what motivated
theban which the truck drivers tried to fight off.
Variance
Adulteration on the other hand is fuelled by the huge
margin variance in taxation between diesel and
kerosene. Diesel is highly taxed at 28.83 percent,
compared to kerosene which is 7.65 percent. The
distribution model adopted for fuel has left the oil
marketing companies with no answerability towards
their products. Once it leaves the depot, the product
belongs to the petroleum dealers. ERC have gone
round it now. They are blacklisting the petrol stations
found with adulterated fuels. Last year major brands
were found with this kind of fuel which left many
companies with a damaged brand reputation and
negative consequences. For example Vivo Energy
stopped selling paraffin in their Petrol stations just to
curb that.
Incentive
One of the major suggestions was levelling the taxation of
kerosene and diesel. The rate is 20 percent lower in Kenya
while in Tanzania the price of diesel and kerosene is the
same. This has ensured there is no incentive to tamper with
fuel in Tanzania. Although taxes added to the kerosene
during the 2016 budget were at 7 percent, the diesel prices
have gone up with similar margins. The commission has
made considerable efforts to stem this vice with the current
compliance levels rising to 97 percent of unadulterated
fuel stations.
Dipsticks
A radical suggestion by the ERC is to introduce meters at the
point of delivery of the fuel products so that the customer
pays exactly what he has received. This is intended to
eliminate use of dipsticks that have enabled manipulation
of the amount of fuel in the tanks. “This is working well in
South Africa and we hope it will beadopted in Kenya soon,”
said Mr Kinyua. The WattsUp team has established that the
biggest challenge is the cartels in the oil sector that are very
hard to dismantle. With the margins and the cash involved,
they are greatly entrenched. In fact our investigations have
revealed the oil marketers fear for their lives once they try
to confront this menace
“Meters are working well in South Africa.
We hope to adopt them in Kenya soon”
Edward Kinyua, head of petroleum at ERC
WATTS UP MAGAZINE APR - MAY 2017
11