Kenyan Treasury Diverts Another Sh2billion for Fuel Subsidy

Kenyan Treasury Diverts Another Sh2billion for Fuel Subsidy (News Central TV)

Auditor-General of Kenya, Nancy Gathungu has revealed that some undisclosed private firm and State agencies will benefit from the Treasury’s diversion of Sh2.074 billion from the Petroleum Development Fund (PDF).

The diversions which are in breach of the law drain funds meant for cushioning consumers against high fuel prices.

Among the beneficiaries of this latest diversion are Rural Electrification and Renewal Energy Corporation, the Ministry of Energy, the Nuclear Power and Energy Agency and the Kenya Energy Sector-Environment and Social Responsibility Programme.

Information reveals that no document was submitted to the Auditor-General to show how the funds were used by the agencies and the private company.

Auditor-General of Kenya, Nancy Gathungu

The Rural Electrification and Renewal Energy Corporation was the biggest beneficiary of the diversion at Sh1.359 billion followed by the Ministry of Energy at Sh500 million.

The Nuclear Power and Energy Agency received Sh130 million, the Kenya Energy Sector-Environment and Social Responsibility Programme got Sh50 million while the unnamed firm took Sh35 million.

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Gathungu, in her review of the use of the PDF in the period ended June last year, “The fund management transferred a total of Sh2.074 billion to various government agencies and one private entity which have no responsibility in the oil and petroleum industry.”

“In the circumstances, the propriety and validity of transfers to other government entities of Sh2,074,000,000 and Sh35,000,000 transferred to a private entity for the year ended June 2021 could not be confirmed and management was in breach of the law,” she added.

The PDF Act of 1991 demands that the fund be used to support a subsidy when fuel prices go up and infrastructure upgrades in the petroleum sectors, making last year’s transfers illegal.

The special fund was set aside to shield consumers against high costs of fuel and is supported by the petroleum development levy, which was increased to Sh5.40 a litre in July 2020 from Sh0.40.

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The diversion put more pressure on the fuel subsidy scheme as the government has since last year grappled with a lack of funds to fully compensate oil marketers for keeping pump prices unchanged.

MPs last year directed the Treasury to compensate motorists for the Sh18.1 billion that had been diverted to fund the operating costs of the standard gauge railway (SGR).

The Treasury informed Parliament that diversion of the funds depleted the fund, leading to termination of the fuel subsidy scheme in the monthly review to October 14, 2021.

The subsidy was restored in the monthly review ending November last year but at a cost to oil marketers who are grappling with delayed compensation.

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Pump prices directly impact the living cost, given that the Kenyan economy is diesel-driven and manufacturers and farmers pass the increase in costs to consumers.

Kenya started stabilising fuel prices in the monthly review ended April last year but the subsidy scheme has faced cash-flow crisis attributed to illegal diversions of cash meant to compensate the oil marketers.


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