The Government has waived KSh 11 billion in tax arrears owed by the debt-ridden Mumias Sugar Company.
The information was disclosed by the Kakamega Governor Wycliffe Oparanya, while co-chairing the Kenya Sugar Taskforce with former Agriculture Cabinet Secretary Mwangi Kiunjuri.
KRA stopped Mumias from producing ethanol in April demanding payment of the debt.
The Company is currently under receivership due to a KSh 12 Billion debt it owes KCB Group and other creditors.
“Negotiations are ongoing to have other debts owed to the government agencies and other institutions like Kenya Power written off to facilitate the revival plan,” Oparanya said.
However, Mumias Sugar receiver-manager P.V.R Rao said there has been no communication to that effect.
Rao said that the company has finalized preparations to restart milling sugar.
Even with the tax waiver, Mumias Sugar faces numerous challenges such as increased competition from local and international rivals.
Experts maintain that most of the sugar mills in Kenya may not survive the flood of competition when sugar import safeguards are lifted.
The two-year extension period of the sugar safeguards by the Common Market for Eastern and Southern Africa (Comesa) expires in February next year.
Kenya’s inefficient sugar sector is currently protected by safeguards against any duty-free imports from the Common Market for Eastern and Southern Africa (COMESA).
Following the launch of the Free Trade Area on October 31, 2000 by members of Comesa, Kenya expressed concern that her sugar sector was not able to compete against regional sugar companies.
Kenya applied for protection of the sector by way of a safeguard under Article 61 of the Comesa Treaty so that sugar imports from the common market to Kenya are subject to customs duties.
The safeguard was implemented in March 2002 for an initial period of 12 months and subsequently renewed by the Council of Ministers. Subsequent extensions have been done five times, with the last one lasting a year from February 2014 to February 2015.
Analysts say most of the State-owned sugar milling firms have no capacity to modernize their operations or replace old machinery as required by the conditions imposed before safeguards can be lifted.
Mumias is the only listed sugar miller in Kenya. One of the conditions put to the government is to privatize state-owned sugar mills. The government is yet to hand over control of the state-owned sugar mills to private investors.
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