Financially struggling Mumias Sugar Company is involved in a fresh tussle with the taxman over a requirement to deposit Sh100 million bond before the miller can continue selling ethanol produced at the factory.
Officials from the Kenya Revenue Authority are reported to have stopped lorries which had arrived at the factory on Friday from being loaded with a consignment of ethanol until the miller currently under receivership addresses the issue of the bond.
KRA issued a notice to bankers in September last year restricting transactions on accounts of the cash-strapped miller in a bid to recover Sh10 billion in unpaid taxes.
Last week, the miller had produced 340,000 litres of ethanol which is sold locally to different firms.
The ethanol was part of a consignment ordered for use in manufacturing of affordable alcohol-based hand sanitisers for distribution to vulnerable communities.
The acting Human Resource Manager John Shiundu said on Sunday the move by KRA could paralyse plans to revive milling operations in the next two months.
He said the miller had requested to be allowed to raise Sh10 million but KRA officials rejected the proposal, in a move that could disrupt ethanol production and stifle their only source of revenue.
Receiver manager Mr Ponangipalli Venkata Ramana Rao is reported to be making efforts to address the issue.
“We are appealing to President Uhuru Kenyatta and Kakamega Governor Wycliffe Oparanya to intervene in the issue so that ongoing plans for revival of miller are not disrupted. We have written to the government for a remission on taxes but we are yet to get any response,” said Mr Shiundu.
If the issue is not resolved, 300 casual workers hired by the receiver manager could lose their jobs since the miller will be forced to halt ethanol production.
This could complicate plans for the re-start of sugar milling which could be delayed for two months due to a hitch in shipping of critical equipment needed to operationalise cane crushing at the factory.
The miller has ordered for a rotor which is being shipped in from abroad and it could take several weeks before it is delivered to the factory in Mumias.
Following the developments, the earliest the miller is expected to start milling is July 1.
“We expect the rotor to arrive in the before end of the month and once installed, other preparations will begin to kick start sugar milling,” said the official.
The receiver manager had earlier indicated that the milling operations would start before end of this month.
The company has for the last three months produced slightly over one million litres of the for sale to generate revenue for rehabilitation of production processes.
Management officials are further looking at the option of obtaining raw material from neighbouring Uganda after resuming milling operations due to shortage of raw material currently being experienced in the expansive catchment serving the miller.
In Uganda, a tonne of cane is selling at Sh2,000 compared to Sh3,800 locally. The miller is said to be warming up to the deal to ensure milling operations are sustained.
Kakamega executive for Trade, Industrialisation and Tourism Mr Kassim Were Ali said a team analysing findings of a report on availability of cane in the region was expected to meet after situation surrounding the spread of the coronavirus had improved.