Unscrupulous gas traders edging out legitimate dealers

When the government introduced liquefied petroleum gas rules in July 2009, one of the most striking parts of Legal Notice 121 was the standardisation of LPG cylinder sizes and valves.

The move, for the first time, enabled consumers to exchange their empty cylinders at any outlet regardless of the brand. But seven years later, it has proved to be a double-edged sword, creating what has become to known as the LPG cylinder exchange pool.

In the regulations, all LPG marketers (brand owners) can only sell filled cylinders of their own brand, and all empty cylinders of other brands received from customers must be given back to the brand owners, in exchange for their own cylinders or a deposit refund at a pre-determined rate. 

New domestic LPG marketers, however, find the rule prohibitive since one has to be a member of the pool to start selling the commodity.

While the Energy Regulatory Commission maintains that the pool system has increased the number of cylinders in the market and promoted competition, the industry lobby group believes it has only allowed black market dealers to gain unfairly by finding it easy to refill any cylinder thanks to the standard valves.

“The cylinder exchange pool has greatly increased competition and assured an improved level of access of LPG by consumers. Due to the exchange system, the number of brand owners has grown from six in 2009 to 40 in 2016,” says ERC acting Director of Petroleum Edward Kinyua.

“Additionally, consumers can access LPG from the nearest vendor, as opposed to times when they were locked to certain brands and had to travel over long distances in search of that brand. Finally, due to the exchange pool, consumers can now exercise their sovereignty and this has stabilised prices due to competition among the various brands.”

For ERC to admit one into the cylinder pool, a company must be ERC licensed and must have at least 5,000 branded cylinders of 1 kg, 3kg, 6kg or 13kg. 

But the marketers have little say on the sold cylinders since they could be filled by any unlicensed dealer — with little care for the brand name.

Apart from bringing in 5,000 cylinders to join the cylinder pool system, new players have to provide a letter of intention detailing their source of LPG as well as have the Environmental Impact Assessment licence by the National Environment Management Authority, plus compliance with the Physical Planning Act, which is also mandatory.

APPROVED DRAWINGS

The regulations also require one to get clearance from the county fire department and have approved drawings from the county government apart from compliance with the Kenya Bureau of Standards, Directorate of Occupational Safety and approval from the Weights and Measures Department.

To beat these regulations, the gas gangsters have invaded the market and taken over branded cylinders owned by those already in the pool. The confusion caused in the cylinder pool almost leaves them with no specific owner, while brand owners claim they cannot even guarantee safety when the containers take years circulating through illegal refillers.

The consumer who has to pay up to Sh5,000 in initial cost of the cylinder — marketers say this is a deposit — cannot also claim to own the cylinders as they are exchanged every time one has depleted gas with a portion the pricing set aside for recalibration. The big question is, who owns the cylinder, then?

With no initial investments in the pool system, the cartel that uses stolen cylinders and counterfeited seals undercuts the brand owners offering gas at cheaper rates with little or no regard to safety.

In Fedha estate, for example, two retailers located about two hundred metres apart were exchanging the 6kg cylinder at a price difference of Sh200.

“The illegal LPG refillers have not invested in cylinders or any operational systems and mechanisms that guarantee consumer safety at every point during the life cycle of the LPG cylinder, including cylinder validation,” Petroleum Institute of East Africa general manager Wanjiku Manyara told the Daily Nation.

While ERC requires that all cylinders are checked after every eight years and the dates of the last check engraved on the cylinder, a number of cylinders in circulation are more than 14 years thanks to the pool confusion.

ERC insists consumers should get receipts so that sellers of substandard products can be traced easily.

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