Kenya has raised the bond fee for fuel consignments destined for Uganda from $15 million to $45 million at the VTTI facility in Mombasa.
According to reports, the higher bond fee is expected to affect Uganda's direct fuel import scheme, making fuel more expensive for people in Uganda when they buy it.
Kenya and Uganda have the most expensive fuel in East Africa, with Uganda relying on direct importation to lower fuel costs. A litre of diesel costs $1.37 in Kampala compared to $1.33 in Kenya.
This bond is a security deposit to cover taxes if the fuel is sold locally instead of it being transported to Uganda. The higher bond fee at the Vitol Tank Terminal in Mombasa is expected to increase the Uganda National Oil Company's (Unoc) costs, potentially preventing a reduction in fuel prices for Ugandans.
According to The East African, Uganda's Energy and Mineral Resources Minister Ruth Nankabirwa said Kenya's increased requirement on the size of bond fees at the Vitol Tank Terminal International (VTTI) storage facility in Mombasa poses a bottleneck to Uganda's hopes of lowering pump prices.
The report added that banks issuing the bonds would likely take time to increase the amounts to reflect the new bond fees, leading to more time demurrage charges passed to consumers in Kampala.
"We expect prices to be more competitive for as long as we are not pushed to incur extra costs at the port because as we speak now, I am going back to Kenya to meet my colleague, Mr (Davis) Chirchir, because of one thing...." Mrs Nankabirwa said.
"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) also to increase, and Ugandans are not likely to see reduced pump prices," she added.
The bond fee hike from $15 million to $45 million is the latest dispute between Kenya and Uganda. The situation highlights regional fuel trade and the challenges faced by landlocked countries in managing fuel costs.
Previous disputes between Kenya and Uganda included delays in licensing and disagreements with Uganda's National Oil Company (Unoc) for fuel importation strategies, which led to a legal case in the East African Court of Justice.
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