State Eyes Private Sector Deal for Cheap LPG After NOC Fiasco

After pumping billions to fund cheaper LPG initiatives through the National Oil Corporation (NOC), the Kenyan government is reviving plans to distribute subsidized liquefied petroleum gas (LPG) cylinders to low-income households. The new strategy shifts from the failed Mwananchi Gas project to a public-private partnership with oil marketing companies (OMCs).

New LPG Distribution Plan

Under the revised initiative, the State plans to distribute 9.6 million 6-kg LPG cylinders to households, with selected OMCs matching each government-supplied unit with their own. This partnership aims to significantly increase clean energy adoption while reducing reliance on charcoal and kerosene.

Private Sector Efficiency

Energy and Petroleum Regulatory Authority (EPRA) Director-General Daniel Kiptoo emphasized that partnering with private players would improve distribution efficiency:

“This will allow them to leverage existing supply chains to distribute those cylinders,” Kiptoo said.

The move follows a 13.38% surge in LPG demand, with consumption reaching 414,861 tonnes in 2024 compared to 360,593 tonnes the previous year.

Failure of Mwananchi Gas Project

The decision to engage private sector players comes after the collapse of the Mwananchi Gas project, launched in 2016, due to:

• Operational inefficiencies
• Accountability issues
• Distribution of defective cylinders

A government audit revealed that 149,773 LPG cylinders distributed through the initial project were unaccounted for as of June 2023. The audit showed the government had invested Sh1.12 billion into the initiative, but 79,057 units were found faulty, leading to the program’s suspension in 2019.

Financial Implications

The Treasury had originally allocated Sh2.2 billion for the three-year program (2017-2019), later increasing funding by over Sh700 million through a supplementary budget, pushing total expenditure to Sh3.1 billion.

The government is now banking on licensed OMCs to ensure better oversight and efficiency, avoiding the pitfalls of the previous rollout.