Big rip-off as Kenyan consumers pay double for cooking gas

NAIROBI: Kenyan are being ripped off by companies that are distributing and selling cooking gas, something that has made the government consider capping the retail prices of the product. The energy industry regulator in an interview with Weekend Business says Kenyans could be paying twice the amount they should be paying for gas, as companies look to maximise on the petroleum product whose pricing is not regulated.

Tabulations by the Energy Regulatory Commission (ERC) show that the cost of bringing a kilogramme of Liquefied Petroleum Gas (LPG) to Nairobi is Sh135 – which would translate to Sh1,755 for a 13kg cylinder. Consumers in Nairobi are however paying Sh253 per kg or Sh3,300 for a 13kg cylinder.

ERC now terms this as unacceptable and said it would in the coming months start a process that will bring about regulations that enable it to control the retail prices of the commodity. The regulator has so far introduced a price control mechanism for diesel, petrol and kerosene to cushion consumers from unwarranted increases in the prices of fuel. Oil marketing companies have argued that the move to cap prices hit their profits and many have heavily relied on LPG to keep their earnings stable.

Linus Gitonga director of petroleum ERC said consumers are paying almost double the cost when buying cooking gas. He noted that leaving the market forces to set prices has not worked in Kenya, with LPG marketers exhibiting cartel like behaviour and to extent the lucrative nature of the cooking gas business has encouraged unscrupulous traders and illegal refilling of gas cylinders.

“The landed cost of LPG in Nairobi today is Sh135 per kilogramme inclusive of taxes but a 13kg cylinder is costing up to Sh3,300, translating to Sh253, which is almost twice the landed cost,” Gitonga told Weekend Business. “This is totally unacceptable and has in our view made LPG cylinders too lucrative and has encouraged unscrupulous business men.”

The regulator is now concerned that consumers are paying the price of unscrupulous traders who have infiltrated the profitable Liquefied Petroleum Gas (LPG) industry. “Illegal refilling is a problem which the commission has committed to resolve completely including demolishing unlicensed plants and control of LPG prices which are also encouraging this vice,” said Gitonga.

It is not the first time that ERC has considered capping the prices of LPG. There were plans to start putting a ceiling to the retail prices of the commodity in 2011 during a phase when there was a steep climb in prices but these fizzled mostly on lobbying by oil marketing companies.

It is however, notable that prices have been on a steady rise over the past two years, now retailing at Sh3,300 and Sh3,500 from under Sh2,000 in December last year. This is despite stability in price of crude oil in the international markets as well as the shilling against the dollar, the two factors whose seesaw is always linked to rise and dip in the price of petroleum products locally.