The Kenyan government loses Sh34bn million annually to unscrupulous business people, who sell petrol and diesel mixed with kerosene.
The Petroleum Institute of East Africa (PIEA) said adulteration of petrol and diesel with kerosene creates unfair competition for players engaged in legitimate trade, with the country losing Sh3bn million because of tax evasion.
Adulterated fuel results in vehicles producing heavy smoke before the engines knock.
The Energy Regulatory Commission (ERC) estimates about five million of the 33 million litres of kerosene consumed monthly in Kenya is utilised for lighting and cooking while balance is used for adulterating either diesel or petrol.
“The Treasury has increased excise duty on kerosene by matching it to diesel at $0.1031 per litre. There is still $0.19 per litre tax difference between the two so the vice remains profitable,” said PIEA chairperson Anne Solange.
She said unsuspecting motorists who buy adulterated petrol and diesel incur high expenses repairing engine parts or purchase new engines because of damage caused by fuel not complying to product standards.
Kenya is trying to recover share of the market for oil products exports to Uganda and other countries lost as a result of adulteration.
Authorities in Tanzania and Uganda also face a local illicit trade of adulterated fuel in the market.
Ms Solange said Petroleum Ministry has supported the call for elimination of malpractices noting that the impact of the illicit trade was underestimated until recently when the Kenya Association of Manufacturers demonstrated its effects on local manufacturing.
“We are hopeful ongoing efforts by the Presidential Task Force on that Illicit Trade will hasten closure of facilities where dumping and adulteration takes place,” she added. Untaxed fuel destined for export is also diverted to the local market.
There was a fire incident on June 27, 2018 in an illegal fuel depots in Nairobi, but the fire was contained by Kenya Pipeline Corporation fire fighters.
Petroleum Ministry Chief Administrative Secretary John Musonik said relevant arms of Kenyan government along with ERC have mounted campaign to close down all illegal fuel depots, and take operators to court.