NAIROBI, Kenya – The government unlawfully withdrew Sh58 billion from the Railway Development Levy Fund (RDLF) to finance fuel subsidies between July 2023 and June 2024, in violation of public finance laws, Auditor-General Nancy Gathungu has revealed.
In a damning audit report, Gathungu disclosed that the funds were redirected to settle outstanding payments owed to oil marketing companies—bypassing legal provisions that limit fuel subsidies to the Petroleum Development Levy (PDL) and budgetary allocations by the National Treasury.
“Management indicated that receipts from the RDLF were borrowed to settle arrears due to oil marketing companies, contrary to Section 4(1) of the Petroleum Development Act, 1991,” Gathungu stated in her report.
Illegal Diversion of Funds
The Petroleum Development Act explicitly states that only funds appropriated by Parliament and collections from the PDL can be used to subsidize fuel prices.
Currently, motorists contribute Sh5.40 per litre of petrol and diesel and Sh0.40 per litre of kerosene to the PDL, while the RDLF is charged as a percentage levy on imports, translating to between Sh1 and Sh1.50 per litre of fuel.
The illegal diversion of railway funds has sparked concerns that the PDL kitty may have been depleted, potentially compromising its primary role of stabilizing fuel prices.
Official figures from the National Treasury show that the government spent over Sh47.26 billion on fuel subsidies between April 2023 and June 2024, despite the fact that PDL collections fell Sh7.74 billion short of the Sh32.08 billion target.
Reintroduction of Fuel Subsidies
This latest revelation comes amid the government’s policy U-turn on fuel subsidies.
In 2022, President William Ruto scrapped the subsidy program, citing budgetary constraints.
However, the scheme was reintroduced as global oil prices soared, forcing the state to cushion consumers against the rising cost of fuel.
In the pricing cycle leading to November 14, 2023, the subsidy prevented petrol prices from hitting Sh220.43 per litre and diesel from reaching Sh217.11 per litre.
Instead, motorists paid Sh217.36 for petrol and Sh205.47 for diesel during that period.
Gathungu warned that the underperformance in PDL collections has had a negative impact on service delivery.
“The under-collection and under-performance may have affected planned activities and impacted negatively on service delivery to the public,” she noted in a separate review of the PDL fund.
SGR at Risk?
The audit report raises concerns about the financial health of the Standard Gauge Railway (SGR), which depends on the RDLF to sustain its operations and service the multi-billion-shilling Chinese loan used to construct the railway.
Since its launch in 2017, the SGR has struggled to generate enough revenue from passenger and freight operations, making it heavily reliant on government support.
The illegal diversion of Sh58 billion from the RDLF could exacerbate financial challenges for the railway, which is already facing sustainability concerns.
This is not the first time the government has mismanaged funds meant for fuel or transport infrastructure.
In August 2021, Sh18.1 billion from the PDL kitty was unlawfully diverted to pay a Chinese firm operating the SGR, leaving the government scrambling to sustain the fuel subsidy program.
Accountability Questions
The latest audit findings raise serious accountability concerns, particularly as Kenya grapples with economic challenges and a mounting public debt burden.
The revelations put fresh scrutiny on the government’s commitment to prudent financial management and adherence to public finance laws.
As calls for greater transparency grow louder, it remains to be seen whether the government will take corrective action—or if this will be yet another case of financial impunity.
