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Kerosene subsidy controversy – Punch

By The Citizen
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WE live in strangely corrupt times. As the size of public revenue, which is meant for development, grows, so do corrupt public officials get richer through sleazy schemes, leaving the majority in poverty. The latest gut-wrenching scandal was the revelation in the House of Representatives last month that N634 billion had been appropriated as kerosene subsidy over the past three years. Ordering an investigation into the mess, the House rightly observed that kerosene has not been widely available in the market to end-users; neither is it being sold at the regulated price of N50 per litre. The market price is actually between N115 and N150 per litre, which inflicts serious economic pain on the masses. What then happened to the subsidy?

For a nation that is still grappling with the devastating consequences of the over N2 trillion spent on petroleum products subsidy in 2011, this case offers the authorities an opportunity to make a clean break with the past by identifying the culprits and bringing them to justice. Among Nigerian masses, kerosene is the most widely used form of fuel, but as a result of the high price and scarcity, many of them have turned to firewood for cooking. This has a telling negative environmental impact on the country; the widespread action leads to the depletion of the ozone layer, which in turn distorts the climate. Every serious government firmly tackles this kind of issue.

The kerosene subsidy saga has been mired in opacity and corruption for a long time. Noticing this state of affairs, the late President Umaru Yar'Adua, in 2008, directed the Petroleum Products Pricing and Regulatory Agency to stop further payment of subsidy on the product. Although the Nigerian National Petroleum Corporation claims that it has not been receiving kerosene subsidy, a convoluted state policy sees the government fixing the depot price of kerosene at N40.90 per litre. But the dealers purchase the product at the depot at the rate of between N65 and N75 per litre, with the cost doubling by the time it gets to an average consumer. Even in a free market, the price is not supposed to go up by 100 per cent.

The government needs to act on the explanation by Reginald Ibe, the PPPRA Executive Secretary, on why the product is not available in the market, with a view to solving the problem once and for all. Ibe blames the problem of scarcity and high prices on smuggling to neighbouring countries, handling charges and blending a variant of the product with diesel to fuel airplanes. According to him, Dual Purpose Kerosene, which is imported, 'blends perfectly well with diesel,' as 'just blending one litre of kerosene gives the marketer N100 per litre extra profit.' He added, '…the temptation to blend DPK with Associated Gas Oil (diesel) is very high.' Kerosene is also used in the production of the emulsion used in road construction.

But this is not a satisfactory reason for N634 billion worth of subsidy funds to disappear into some private pockets, while the people continue to pay exorbitantly for the product amid scarcity. The House Committee on Downstream probing these allegations must do a thorough job and get to the root of the matter. Every kobo paid out under the scheme in the past three years must be traced and accounted for. Everybody - or company - that has benefitted must be made to properly account for what they have been receiving. The era of a clique of individuals cornering the public till must stop.

India has been paying subsidy on kerosene since World War II. However, the Indian authorities had to reform the system a few years ago when they noticed widespread corruption in their subsidy scheme. The Asian country changed the system by targeting a more efficient access to the poor and tracking the subsidy on the product. But today, even India is having a rethink of the subsidy on diesel, kerosene, LPG (and gasoline), which was said to have cost the government $9.6 billion in the 2010-2011 fiscal year. Our authorities should make the subsidy regime transparent: every company that has benefitted must be made known, while those who are diverting the subsidy or using it for other purposes must be identified and prosecuted.

Another challenge before the government is to make the local refineries work to their full capacity. And the only way this can be achieved is to transparently privatise the four refineries quickly. Although the government has said that it will sell the refineries to private investors by the first quarter of 2014, the sale must be properly and credibly done. This will stop the irresponsibility of importing refined petroleum products into a country that is the 13th largest producer of crude oil in the world.