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MPs told how State lost Sh20b in oil refinery deal

By By ALPHONCE SHIUNDU | September 25th 2013 at 00:00:00 GMT +0300


Nairobi County: Majority Leader Aden Duale appeared before the Parliamentary Public Investment Committee (PIC) with details of what appears to be a well-orchestrated scheme by key players in the government to fleece the taxpayer.

Duale told PIC that over Sh20 billion had been lost so far in the deal in which half of the equity at Kenya Petroleum Refinery Limited (KPRL) was handed to an Indian firm –Essar.

He said the deal was “fuelled by greed and corruption” in the corridors of power and the MPs, who have investigated questionable deals at the National Cereals and Produce Board and Telkom Kenya, agreed that there was a powerful cartel that was fleecing the taxpayer.

“In my opinion, this is Anglo Leasing and Goldenberg combined. It is worse than the Westgate killings because, they have been and are still fleecing Kenyans,” said Duale at the PIC meeting held at the main Parliament buildings in Nairobi yesterday.

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The 50 per cent stake to Essar was sold for USD10 million. The government made only USD2 million from the deal, and this too, was paid two years after Essar took over at the refinery.

“They had the refinery for two years, between 2009 and 2011, without even paying a cent. They made the first payment in 2011,” Duale said.

The MP said between December 2010 and April 2013, the last 29 months of the coalition government led by President Kibaki and Prime Minister Raila Odinga, the refinery lost Sh13.7 billion. The end result was a rise in the price of oil products to line the pockets of the managers of the refinery.

Duale, who is also the MP for Garissa Township Constituency, told the shocked committee members that every time, motorists pay Sh2.74 extra per litre of petrol, and Sh2.54 per litre of diesel, it is because of the inefficiencies at the refinery.

Similarly, every time a Kenyan buys kerosene, Sh3.30 ends up in the pockets of well-placed powerful individuals at the National Treasury, and in other key offices “on Harambee Avenue”.

Shady system

The Office of the President, that of his deputy, and the National Treasury are all based on Harambee Avenue. Duale tabled a dossier, which he insisted had the backing of the Cabinet Secretary for Energy Davis Chirchir, which shows that every month, the plum Kenya Petroleum Refinery Limited loses Sh511 million because of a “shady” system.

“Kenyans should know that they are paying more and that money goes to Essar, who they share it with is not public knowledge. If the products were imported directly, Kenyans would pay Sh5 less. It took me eight months to compile this document. I stand by it. If anyone has information to the contrary, let them table it here,” said Duale.

He asked the committee to obtain a confidential audit report, which shows that KPRL owes oil marketers Sh7.1 billion because of inefficiencies.

The majority leader insisted that Essar had duped the government. He called for the deal to be cancelled, because, the main basis of the deal was to ensure the refinery was upgraded, but ever since Essar took over, “not even a single cent had been invested into the refinery”.

The MP quoted cabinet memos and minutes of KPRL board meetings, which show that the main reason why Essar was picked is because it promised to pump more money into the refinery and ensure it is upgraded.

“In addition to their private sector experience in managing refineries, their upgrade approach was purely from a commercial angle, which was preferred. They had committed themselves to supporting KPRL to obtain funding from local and international investors at favourable terms,” Duale told the PIC.

He said the deal should be cancelled, but he warned that Essar was likely to rush to court to block the cancellation.

Duale said the land on which the refinery is based spans over 300 acres in the prime location of Changamwe in Mombasa County. He told the committee that if the land had been valued at the current market rates, the government would have made Sh15 billion from the deal.

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