Treasury sets aside KSh25bn for controversial fuel subsidy
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Treasury sets aside KSh25bn to settle arrears for controversial fuel subsidy debt owed to oil marketers
Treasury sets aside KSh25bn to settle arrears for controversial fuel subsidy debt owed to oil marketers.
The government has set aside Sh25.2 billion to settle the controversial fuel subsidy debt owed to oil marketers in the new budget to clear arrears.
The 2023/24 budget has been modified by Treasury Cabinet Secretary Njuguna Ndung’u to incorporate payments to the businesses and alleviate their cash flow issues.
Oil majors were pushed by compensation delays to borrow more money from banks to cover costly capital expenditures, while several small dealers have been forced to close shop albeit temporarily.
“Mr chairman, following the re-organization of government, the Parliaments resolution while approving the 2023 Budget Policy Statement (BPS) and to take care of payment of fuel subsidy arrears carried over from the financial year 2022/23, we have proposed amendments to the financial year 2023/24 budget as approved herewith- oil exploration, distribution of oil and gas-Sh25,222,411,755,” Prof Ndung’u said in a report to Budget and Appropriations Committee (BAC).
“The funds will cater for fuel stabilization and funded through Petroleum Development Levy (PDL).”
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The Treasury has also revised the 2023/24 budget estimates and allocated Sh6.8 billion to the State House, Sh1.14 billion to the office of Prime Cabinet Secretary Musalia Mudavadi, and Sh13.7 billion towards implementation of presidential directives on the funding of Kenya Red Cross.
In April, oil marketers received Sh4.2 billion as compensation for keeping pump prices low. Energy and Petroleum Cabinet Secretary Davies Chirchir said the government is keen to fully pay the marketers.
Compensation delays have hit independent oil dealers harder than the well-oiled multinationals, nearly pushing them out of business.
TotalEnergies Marketing Kenya took Sh14.5 billion worth of short-term loans in the year ended December amid a sharp rise in working capital requirements due to the debts owed by customers and high fuel prices.
The multinational did not say the amount owed by the government under the subsidy but its rival, Vivo Energy Kenya said the State owed it $167 million (Sh22.6 billion) for the programme in the year ended December.
Disclosures by the parent firm, Vivo Energy Limited, show that government receivables increased from Sh4.023 billion a year earlier amid Treasury’s struggles to compensate oil marketers for keeping pump prices low.
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