State gazettes rules to govern petroleum lubricants

The Energy Regulatory Commission is moving to intensify the policing of the lubricants businesses, an essential product category in petroleum sub-sector but one that has largely operated in a laissez faire manner over the years.
The energy industry regulator on Tthursday published the Draft Energy (Lubricants Business Licensing) Regulations 2013 that are expected to mainstream the industry as well as run out of market rogue dealers that have sold sub-standard products.

Increased regulation for the industry is on the back of huge amounts of money that the Government is losing in tax revenues due to proliferation of illegal trade as well as loss of market for the legit traders and consumer exposure to sub-standard products. ERC invited industry players to submit their views on the proposed regulations in the next forty days. “The ERC hereby invites members of the public to submit written comments within 40 days... on the proposed regulations,” said ERC in a gazette notice released on Friday.

The regulations require businesses handling lubricants including importers, distributors, transporters and packaging to have an ERC issued licence that the regulator will give after inspection of facilities.
It also gives ERC officials a leeway to make impromptu inspection visits to facilities used in handling lubricants. The regulations prescribe a penalty of Sh1 million fine or a one year jail term for business owners found contravening any of the set out rules.

Lubricants industry regulation is expected to bring about order in the business as well as deal with substandard products in the market and create a level playing field for all.

Industry players have in the past accused the government of doing little in prevention of sale of illegal lubricants and in turn created uneven playing field for the legitimate traders, loss of tax revenue and at the same time exposing consumers to sub-standard products.

It is estimated that East African Community Governments lose in excess of Sh16 billion in tax revenues, with losses incurred by Kenya accounting for about a third of this. Lubricants attract 25 per cent duty and a 16 per cent Value Added Tax, money that the illegal businesses do not pay taxes and hence able to offer much lower prices.

Consumers on the other hand incur high costs due to frequent breakdowns in their machinery, high fuel consumption that is caused by use of sub-standard lubricants and the shortened life span of their equipment. Dealers have been diverting products intended for export to other East Africa