Mumias seeks tax waiver for ethanol

Wednesday March 18 2020
Mumias Photo

The Mumias Sugar Company's main gate. FILE PHOTO | NATION MEDIA GROUP

By BENSON AMADALA  

The management of Mumias Sugar Company is seeking a tax waiver for ethanol to enable the miller generate sufficient revenue to support its revival strategy.

The miller has produced 300,000 litres of ethanol in the last three weeks after kick-starting operations on February 1.

But officials complained that there were poor returns from sales due to high taxation.

Mr Ponangipalli Venkata Ramana Rao, the receiver manager, and his team have now petitioned the government to consider waving the excise duty for ethanol, to enable the miller generate adequate revenue.

“We are just making Sh90 from a litre of ethanol we sell. The rest of the money goes into taxes and that is slowing up our revival strategy,” said Mr Rao.

The firm is expected to make Sh27 million from the sale of the 300,000 litres of ethanol.

Management officials said the high taxation on ethanol could disrupt plans to restart milling operations in the next two months.

Mr Rao said the high taxation could be counter-productive to efforts to save the miller from collapse.

“At the moment, this a major headache we are facing and we are appealing to the government to review the taxes to give us an opportunity to turn around the fortunes of the miller,” said Mr Rao.

According to the receiver manager, the initial plan was to restart ethanol production and generate adequate revenue which would then be ploughed into kick starting milling operations. 

The miller is currently relying on molasses and bagasse from the privately-run Butali Sugar Mills to sustain its ethanol production while the management makes plans to start sugar milling.

The debt-ridden firm was placed under receivership in September last year by the KCB Bank.

Mr Rao has been involved in efforts to revive the miller in partnership with the Kakamega County government, which has unveiled plans to support farmers to resume cane growing to ensure the miller has adequate raw material to sustain operations.

But Mr Rao maintained: “We are keen to get Mumias Sugar Company back on track and ensure residents who rely on cane farming for their livelihoods benefit from the revival of the factory.”

The production of ethanol started two days after Kenya Power reconnected electricity supply to the factory following negotiations with the management of the power utility firm which is owed close to Sh1 billion in unpaid power bills.

Mr Rao had indicated in an interview last month that plans for the revival of the miller could cost up to Sh500 million.

He said the miller plans come up with a new strategy involving payment of farmers once they deliver cane to the factory.

During commissioning of an ethanol distillery, Mr Rao said: “We have today, started ethanol production for commercial purposes as part of our plans to generate cash that will stabilize the factory operations."

There are plans by the Kakamega county government to provide supply of farm inputs and use of tractors to plough their farms to enhance cane development in the region.

The miller stopped operations 22 months ago due to lack of adequate supply of raw material and piling debts which crippled operations.

The miller is currently ploughing 8,000 acres in the nucleus estate for planting cane in the next six months and will further outsource raw material from farmers in its catchment.