Cooking gas cylinders. In the low-cost project, cylinders were to be refilled at National Oil. FILE PHOTO | NMG
A cartel of illegal Liquefied Petroleum Gas (LPG) traders hijacked the government’s Sh3 billion low-cost cylinder project due to a poor execution strategy and haphazard implementation, the Sunday Nation can reveal.
Insiders at the Ministry of Petroleum and Mining, who did not wish to be named for fear of intimidation by their employer, intimated that the ministry is in fact currently engaging a consultant to find out the best model for such a cylinder distribution months after the project was launched.
The plan, which is said to have been badly funded may have wasted most of the Sh1.5 billion with an unknown sum said to have gone to benchmarking trips that saw the ministry either poorly pay or completely fail to pay cylinder manufacturers who they later accused of making substandard containers.
Petroleum PS Andrew Kamau confirmed to the Sunday Nation that rogue traders took advantage of the subsidised cylinder plan, which was meant to be solely distributed by National Oil Corporation of Kenya (Nock) to make a killing from the government.
“Unscrupulous traders took advantage of the cheap cylinders and bought them at the Sh2,000 and sold them at Sh4,000. We also had financial constraints given that we got the Sh1.5 billion but in the supplementary budget, we got nothing. It will now be upon the National Oil to source for funds and promote the LPG plan just like other private players are doing,” said Kamau.
It remains to be seen whether the National Treasury, which last year allocated Sh2.2 billion for the three year-programme (2017-2019) and later increased the amount by more than Sh700 million through a supplementary budget, was doing a public relations exercise yet there was no disbursement.
In one of the salient operational mishaps, one of the manufacturers, Allied East Africa Limited, had its contract amended thrice with each revision scaling down order for the empty cylinders supply from 500,000 to 148,000, a scenario PS Kamau attributed to lack of funds.
The manufacturer said despite the mixed signals (including branding) in the ordering of the cylinders, the ministry which later started complaining about the quality of the cylinders inspected them before collection and never provided any reports that they had failed any tests.
The ministry in a letter to Allied EA dated July 9 even admitted to accepting the cylinders and deploying them into the market before realising they were leaking.
“After signing the contract, you supplied a total of 24,873 cylinders which were inspected and accepted for use in the ministry’s mwananchi gas project. However, when the cylinders were brought back from the market for refilling at the Nock depot, 15,350 were found to be leaking,” reads the letter, which demanded Sh40.3 million compensation from the manufacturer.
It remains unclear how long the containers had been in the general cylinder pool, which is largely unregulated since users refill them at outlets of their choice after emptying their contents making it hard to track where they are refilled.
It is also difficult to know just how the government was planning to keep track of the 1.2 million cylinders envisioned under the programme which would see LPG adoption scale up from the current 10 per cent to 70 per cent by 2020.
PS Kamau’s admission that crooks hijacked the process amplifies the manufacture’s argument that they were unable to tell what happened to the cylinders that were being used to pilot the project in Machakos and Kajiado counties before an expected mega roll-out.
“Under the terms of the contract, it is expressly clear that our obligation to the ministry in relation to the cylinders ended upon inspection and acceptance of those cylinders. It becomes extremely difficult for us to accept responsibility for the alleged 15,350 cylinders which had been received, inspected, and released for circulation by the ministry for a considerable period of time,” Mr Hamza Ali Noor, Allied E.A managing director said in response to the ministry’s allegations.
Under the plan, poor households stuck with dirty sources of cooking fuel such as kerosene and wood would get the cheaper cylinders, gas, burner and grill, which they would then refill them at Sh840 for the 6kg cylinder. It, however, remains unclear how National Oil with its limited outlet was meant to implement such a project across the country.
The ministry is also said to have put Nock at the odds by merely making it a cylinder distributor in the plan, which had locked out any independent dealers with network that may have been supplementary for its success.
Mr Kamau now believes although the government applied sudden brakes on the project, it was critical to whet the appetite for private players who have now designed innovative ways to promote LPG usage.
“The critical thing is that it has been demonstrated that it can be done. We have shown the way and the private sector have joined in,” he said.