The Energy and Petroleum Regulatory Authority (EPRA) is grappling with increased cases of fuel dumping and adulteration, which it says denies government millions in revenues.
EPRA's acting enforcement director Cyprian Nyakundi said the illegal trade is largely being carried out by licensed exporters seeking to profiteer from from tax evasion.
The authority has threatened to revoke licences for EPRA-authorised fuel tankers and prosecute the landowners whose sites are used as depots for the illegal trade.
“If an average of Sh40 of the price on fuel is exempted as tax to encourage exports, we lose much if the product is diverted back into the country,” Nyakundi said.
He said some traders are filling their tankers with water to cross the inspection bridges and border checks to dupe inspectors
Most of the fuel for export is destined for the Congo, Uganda and Rwanda markets.
Nyakundi spoke during a raid on five illegal sites in Nairobi's Industrial Area and South B.
The team nabbed a petrol tanker and diesel tanker. Also seized was 400 litres of engine oil and 900 litres of kerosene.
EPRA director general Pavel Oimeke the trade is becoming a challenge and a great risk to businesses and homes around their operations.
As result, this has seen Kenya Revenue Authority loss close to one million from a single smuggling spot in quarterly in a year.
"It is big concern for the authority because people want to make quick money as they go behind the law,” Oimeke said.
Currently, the government exempts Sh45.90, Sh36.27 and Sh36.21 as taxes and levies from petrol, diesel and kerosene meant for he export market respectively. This translates to an average of Sh39,460 per 1,000 litres in exemption of the excise duty.
Petroleum Institute of East Africa (PIEA) has estimated that adulteration of petrol and diesel with kerosene loses the country $340 million (Sh34 billion) because of tax evasion.
It is for this reason the government introduced the anti-adulteration levy on illuminating kerosene of Sh18 raising the cost of the fuel.
EPRA has carried operations in the five months to May, rushing out more than 50 illegal sites in Nairobi and other 100 in Eldoret, Mombasa and Kisumu.
Oimeke said the traders will be charged a penalty of upto Sh10 million and imprisonment as dictated in the Energy Act 2019.
