Kenya suspends fuel inspection levy

March 15, 2010 12:00 am

, NAIROBI, Kenya, Mar 15- The Government has suspended with immediate effect a controversial directive to increase fuel import inspection fees that has seen pump prices rise by Sh4.

The decision was announced after a consultative meeting between the Ministry of Industrialization, the Petroleum Institute of East Africa, the Public Procurement Oversight Authority and the Kenya Bureau of Standards held at the Ministry headquarters in Nairobi.

“The Government has suspended the implementation of legal notice No. 142 of 2009 which authorized the Kenya Bureau of Standards to carry out inspection of petroleum imported into the country,” said a statement from the Industrialisation Ministry.

The meeting which was occasioned by the Government’s concern over the high fuel pump prices, also resolved that all money already paid for inspection by oil industry players in the country since March 1 be refunded.

Oil marketers have in the last few days have been paying a levy of 0.675 per cent of cost, insurance and freight (CIF) of every consignment of crude oil and imported refined fuel, which they had in effect passed on to the consumers.

Indian firm Geo Chem Middle East, which was controversially single-sourced by KEBS has been conducting the exercise with the fees paid to the Kenya Revenue Authority, a move that the oil Marketers were opposed to.

Initially, the exercise was carried out by SGS and Intertek International Services (ITS) on their behalf.

Besides the 16 percent Value Added Tax, firms used to pay Sh1.50 for every tonne of imported crude oil inspected and Sh9.50 per tonne for refined products.

The meeting with the stakeholders however resolved that the Government would carry out the inspection itself through the standards body.  A technical Committee comprising membership from KEBS and members of the PIEA was set up to review the petroleum inspection program.

It is not clear what will happen to the contract awarded to Geo Chem whose appointment is said to have been the one of the reasons why former KEBS Managing Director Eng Kioko Mang’eli was fired.

Earlier, Energy Minister Kiraitu Murungi had criticised oil marketers for their recent Sh3 to Sh4 increase in pump prices to reflect an adjustment in the cost of fuel inspection saying it was insincere and unjustified.

Mr Murungi said both the Treasury and his Ministry agreed to the proposal to have a private firm inspect the quality and quantity of imported fuel on the agreement that the increment would only be 25 cent per litre.

“The impression we had been given was that the cost would be marginal but we are surprised that the oil companies are charging between Sh3 and Sh4 as a result of that inspection,” he said.

“We think that some people are taking advantage of a very good intention of verifying the quantity and quality of oil products coming into this country,” he added.

The implementation of the directive would most likely have led to an increase in the prices of other consumer commodities and services such as transportation costs.

To cushion Kenyans, Mr Kiraitu had told reporters that he would try to persuade his colleagues in parliament and in government to consider introducing price controls in the sector if the marketers continue to arbitrarily increase the retail prices.

A proposal to regulate fuel prices was shot down by the National Economic and Social Council which advises the president on economic and social matters, which called on the government to develop and implement other mechanisms.


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