Kenya has imposed new requirement on Uganda’s direct fuel import initiative, raising the bond fee for fuel shipments destined for Kampala to $45 million.
This increase from $15 million at the Vitol Tank Terminal International (VTTI) in Mombasa poses a challenge to Uganda’s efforts to reduce fuel prices for consumers.
The VTTI terminal, connected to Kenya’s pipeline network in Mombasa, serves as a crucial entry point for Uganda and other landlocked countries.
What is Bond Fee?
A bond fee functions as a bank guarantee used by oil importers to secure duties and taxes owed to the revenue authority in case the fuel is sold locally instead of being transported through duty-free channels.
“They (Kenya) have increased the bond fee at Vitol terminal where we are offloading our products and when you increase the bond fee by the tune of 40 million dollars, that means you are pushing Unoc (Uganda National Oil Company) to also increase and Ugandans are not likely to see reduced pump prices,” said Uganda’s Energy and Mineral Resources minister Ruth Nankabirwa.
The Kenya’s Ministry of Energy decision to raise this fee, reportedly at the behest of the Kenya Revenue Authority (KRA), is expected to result in higher costs passed on to Ugandan consumers.
This prompted concerns about potential delays and increased demurrage charges as banks adjust to the higher bond requirements.
Also Read: Uganda Begins Direct Importation of Fuel Via Port of Mombasa
Uganda had hoped that direct fuel imports would lead to more competitive pricing and alleviate the high fuel costs that have persisted in the region.
However, this latest hurdle paints clear tensions between the two countries over fuel importation practices and regulatory issues.
President Yoweri Museveni had previously criticized the role of middlemen in the Kenyan fuel import structure and advocated for direct government-to-government fuel deals to address pricing concerns.
The in bond fees further complicates these efforts and stretches challenges in achieving mutually beneficial energy policies between Uganda and Kenya.
This development comes amidst previous disputes, including delays in licensing Uganda’s National Oil Company and disagreements over importation protocols, which have strained bilateral relations and led to legal action at the East African Court of Justice.
