Motorists pay Sh1.3bn for delayed oil vessels

Economy

Motorists pay Sh1.3bn for delayed oil vessels

Thursday October 07 2021

By EDWIN MUTAI
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Summary

• Motorists forked out Sh1.3 billion in the six months to June as compensation to shipping vessels that delayed clearing oil cargo at the Mombasa port, partly increasing pump prices.
• The National Assembly’s Finance Committee says consumers of petroleum products paid the billions of shillings in demurrage charges—waiting fees for delayed ships.

Motorists forked out Sh1.3 billion in the six months to June as compensation to shipping vessels that delayed clearing oil cargo at the Mombasa port, partly increasing pump prices.

The National Assembly’s Finance Committee says consumers of petroleum products paid the billions of shillings in demurrage charges—waiting fees for delayed ships— with some vessels pocketing more than Sh55 million for an 11-day delay in clearing petroleum cargo at the port of Mombasa.

The charges form part of the landed costs of petroleum products and the increase is passed on to consumers. Pump prices last month hit historic highs of Sh134.72 for a litre of petrol while diesel jumped Sh7.94 to Sh115.6, prompting Parliament to start a review of taxes on petroleum products and all factors including demurrage charges that have been blamed for the rise in prices.

“According to records that we have obtained, between January and June, we had paid Sh1.3 billion in demurrage charges to 60 shipping lines. This money is transferred to the consumer immediately,” chair of the National Assembly Committee on Finance and National Planning Gladys Wanga said.

A summary of demurrage charges for oil tender service (OTS) firms for 2021 tabled before the committee shows that vessel MT Lian Gui Hu pocketed Sh54.2 million ($492,681) for January and February.

Vessel MT Clear Ocean Apollon got Sh31.9 million ($290,497) in the same period while MT Captain John was paid Sh28.6 million ($259,992) which were included in the landed costs for January and February pump pricing.

The details were contained in a report that however failed to include the dates of arrival for the different vessels and the number of days it stayed before discharging cargo.

The committee is now recommending a reduction of the levy that raises funds for the fuel subsidy scheme from Sh5.40 per litre to Sh2.90 and abolishing other levies as one of the ways of curbing the jump in pump prices.

The committee has further recommended a cut on the Value Added Tax (VAT) from Sh8 per litre to Sh4 and reduction of VAT on petroleum liquefied gas (LPG) from 16 percent to eight percent and margins for oil companies reduced by Sh3 from the current Sh12 to Sh9.

The MPs also want the inflation adjustment on fuel waived this year and the annual adjustment to be done bi-annually starting next year.

Fuel prices last month rose to record highs after the State removed a subsidy that had since March kept diesel and kerosene prices unchanged, with those for petrol remaining the same except in the May review.

Kenya discontinued the subsidy, citing lack of funds, after the Treasury depleted the Fund following withdrawal of Sh18.1 billion to pay the Chinese firm operating the standard gauge railway (SGR).

The committee has also directed the Treasury to return the funds and reinstate the subsidy that was introduced in April and discontinued last month.

Removal of the subsidy of Sh7.10 on petrol, Sh9.90 on diesel and Sh11.36 on kerosene that applied on the prices of fuel sold in the month to October 14 pushed the price of petrol by Sh7.58 a litre in Nairobi to Sh134.72 while diesel jumped Sh7.94 to Sh115.6 a litre.

MPs will next week debate the committee’s recommendations as the State moves to cushion motorists from a spike in pump prices even as global prices for crude hit a three-year high on increasing demand.

Petroleum Cabinet secretary John Munyes and his PS Andrew Kamau yesterday snubbed a meeting of the committee on a petition over costly fuel prices.

They were required to provide information on payments the government has made to shipping lines for idling at the port.