A Review of the Nigerian Energy Industry

Adulterated fuel causing concern in Uganda

Fuel dispencer24 October 2013, Kampala – There are just too many fuel stations in Kampala today. From one block after another, the sight of fuel stations – some of which are not even more than 15 metres apart – is something that the people in the city have been accustomed to.

While some might view this as a sign of a thriving economy, others, especially the bigger fuel companies like Vivo Energy, feel that the smaller companies have become a conduit for adulterated fuel, which has tarnished the image of the entire industry. Adulterated fuel also affects the vehicle engines.

“The situation is bad. What we want is to ensure that at every shell station, fuel coming in is sampled, plus every shell station also employs a quality marshal,” Ivan Kyayonka, the Country Manager at Vivo Energy Uganda, said. He was speaking at the tour of Vivo’s laboratory in the industrial area.

Uganda continues to lose tax revenues due to smuggled and adulterated fuel. Fuel forms part of the top five smuggled items into Uganda, according to the Uganda Revenue Authority. Uganda National Bureau of Standards is charged with tracking any adulterated fuel in the country. But the body says it is understaffed, and the racket of adulterated fuel has grown bigger and too complex for it to handle.

Ben Mayindo, the Executive Director at UNBS, went as far as labelling this “criminal activity.”

He said: “You may have a good product from Mombasa or Kisumu and also at your depot but anything can happen between here [depot] and the fuel station.”

On other occasions, the fuel is declared as that heading to countries such as DR Congo or Rwanda, which means it is not supposed to pay tax while in Uganda. However, somehow this fuel is offloaded in Uganda, and easily finds its way to the petrol stations.

Stations which purchase smuggled fuel or sell adulterated fuel can afford to place lower pump prices. Such prices tend to distort the market, and eat into the profit margins of the bigger companies who incur higher costs while playing to the rules of the game without cutting corners.

Industry players think the high taxes slapped on fuel products was part of the reason as to why some traders will go as far as adulterating it. The tax on a litre of a petroleum product varies from paraffin to petrol. The tax fees are anywhere between Shs 300 to Shs 900 per litre depending on the product.

To separate themselves from shoddy business dealings, Vivo Energy, formerly Shell, last week took the media and UNBS officials on a tour of its laboratory to show the vigilance it carries out to ensure its petroleum products meet the standards.

UNBS says it is also playing its role to stamp out the vice. The body, a couple of months ago, introduced four mobile testing stations with upgraded GPS devices in order to trail petroleum products entering the country.

– The Observer

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