Oil marketers’ relief as Treasury wires Sh8bn for subsidy – Business Daily

A petrol station attendant. FILE PHOTO | NMG
The government has paid oil marketers Sh8 billion for stabilisation of pump prices in a move that will lift cash flows of the firms which have been grappling with delayed compensation.
Petroleum Principal Secretary Andrew Kamau told the Business Daily Friday that Treasury released Sh6.7 billion last week, adding to Sh1.27 billion that was in the fuel subsidy kitty to pay for the November-December and December-January pricing cycles.
Compensation delays have pushed marketers into cash flow hitches, especially the independent firms who take bank loans to pay for fuel and distribution costs.
The government last year started keeping pump prices unchanged in the monthly review to defuse simmering public anger over the high cost of basic items.
“We had about Sh1.3 billion in the kitty and this week we requested for additional Sh6.7 billion that Treasury approved,” Mr Kamau said.
The State has since November last year delayed paying oil firms for cuts on their margins in hitches linked to depletion of the kitty.
Treasury last year diverted Sh20.1 billion from the kitty to other State agencies and to pay for operations of the Standard Gauge Railway, leading to the depletion of the fund.
The fuel subsidy kitty has come under increasing pressure amid a global rally in crude prices that will now see the State dig deeper into public coffers to compensate oil firms for the cuts on their margins.
Mr Kamau last week told Parliament the subsidy programme is not sustainable due to the rally in global crude prices that will see the government dig deeper to pay marketers.
Oil marketers are due for compensation of Sh23.29 per litre of diesel, Sh15.88 per litre of kerosene, and Sh14.53 per litre of super in the pricing cycle lapsing on March 14.
Compensation for a litre of diesel increased by Sh7.61 from the review lapsing on December 14, kerosene rose by Sh4.31 while that for super marginally increased by Sh0.77 per litre indicating more strain on the subsidy kitty.
Crude prices touched a seven-year high last week to $94.45 per barrel last Wednesday driven by high demand and jitters over possible disruptions due to the simmering tensions between Russia-Ukraine.
If the Ukraine crisis deteriorates, oil and gas supplies from Russia to Europe may be interrupted, pushing up wholesale prices further.
The supply of oil and gas has struggled to keep up with growing demand as the global economy picked up in recent months while Covid restrictions eased.
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By Kwetu Buzz

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