THE NATIONAL Oil Reserves in Jinja is rationing its distribution of diesel as supplies run low. Fuel imports have fallen below requirements in the last few weeks as Kenya, the main source of our refined petroleum products, seeks to plug loopholes in the fuel tax regime.
Previously, oil dealers were permitted to take stocks from the Mombasa Refinery, sell them, and then pay their tax obligations. But tax evasion was rampant, leading the local authorities to institute the new regime. The Kenya Revenue Authority has changed the system, and is requiring dealers to meet all their tax obligations before they have sold all the fuel.
This has started hurting the numerous economies that depend on Mombasa. Uganda is rationing, and power supplies from thermal generators that run on diesel could be affected. Shortages have been reported in the Kenyan countryside. The effects are likely to be felt in Rwanda, Burundi and Eastern Congo as well.
On the global stage, the timing has also been unfortunate. The price of a barrel of crude oil has been climbing in recent weeks, made all the worse by Hurricane Katrina in southern United States, which affected many of the main refineries in the oil producing Gulf of Mexico.
The shortages in East Africa are partly because dealers are reluctant to tie up their capital in payment of duties before they have realised any returns on sales.
And while it is incumbent upon the KRA to make its tax collection more efficient, there has been inconvenience to honest dealers, who have been victimised in the new system. Not all dealers have been evading tax, and therefore it is important that they be identified for who they are and are given preferential treatment at the refinery.
This may call for the Ugandan government to handle the issue at a high level with their Kenyan counterparts. Thus far the talks have seen the dealers talking to Kenyan functionaries, but as the situation threatens to get out of hand, bigger clout is needed.
Handle fuel crisis with Kenya govt