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Epra sued over special subsidy for diesel users

by kenya-tribune

The Energy Petroleum and Regulatory Authority (Epra) has been sued for cushioning diesel consumers using subsidies raised through higher pricing of super petrol, terming it an abuse of price regulations.

The regulator has since November last year used a cross-subsidisation strategy in which petrol consumers have spent billions of shillings to subsidise diesel buyers as the government attempted to stabilise fuel prices.

The practice means that for every litre of petrol purchased in the current schedule, a consumer pays an extra Sh11.49 that is used to subsidise diesel.

A lawyer, Kevin Ithagi however said that Epra has violated the constitution by offering a subsidy on diesel at the expense of super petrol users who have to incur costs to subsidise diesel.

In his petition at the High Court in Mombasa, the lawyer wants a declaration that the decision by Epra to impose cross-subsidy on the price of diesel with that of super petrol is illegal and unconstitutional. The case will be mentioned today (February 2).

According to the petitioner, in line with the government policy shift, Epra in its press release of September 14 last year ended fuel subsidies on super petrol but retained price reliefs on diesel and kerosene. He further says that in the press release of October 14 last year, in contravention of its mandate, Epra started cross-subsidisation of the price of diesel with that of super petrol.

Arbitrary markup

The petitioner argues that instead of calculating the price of super petrol as per the formula provided in the pricing regulations, they added an arbitrary markup on the price of petroleum products referred to as price stabilisation surplus/deficit.

Mr Ithagi argues that Epra has been levying the stabilisation deficit/surplus for four months from October, leading to higher prices for super petrol than would be if the formula for pricing regulations was applied.

“By charging the arbitrary stabilisation/surplus on super petrol users, the respondent is in abuse of the pricing regulations and contrary to the constitution,” argues Mr Ithagi.

Mr Ithagi who has also sued the Cabinet Secretary for Energy and Petroleum also wants an order issued against Epra to stop imposing a cross-subsidy scheme on the price of diesel with that of petrol.

The petitioner also says there is an expectation through the pricing regulations and formula provided for retail pricing of petroleum prices, that whenever global prices drop, the retail prices would also go down.

“The whole cross-subsidization scheme as structured, applied, and promoted by the respondent is arbitrary, unilateral, and opaque,” says the petitioner.

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