Mumias Sugar wants levy change shelved

A player in the sugar sub-sector says Finance minister Amos Kimunya should not transfer the sugar levy to farmers as he proposed in the Budget.

On Thursday, Mumias Sugar Company managing director Evans Kidero said the development levy would negatively affect the sector, as it would discourage farmers from growing sugar cane. The minister should have adopted the same measure as with the fuel levy whereby the end user pays the levy, said Mr Kidero. "I will be surprised if the levy is effected, because it has the effect of making imported sugar cheaper than locally produced. Further, it means what the farmer takes home will be less than before, a situation that does not encourage one to increase production," Mr Kidero said, after signing a contract with a Japanese Company that will see Mumias sell credits to the company for reducing carbon emissions. 

Mr Kimunya has came under stinging criticism over his radical decision to transfer the Sugar Development Levy from consumers to sugar cane farmers.

Farmers and MPs from sugar growing areas said that loading the Sh1.5 billion a year tax on farmers would favour sugar imports and eventually kill the industry. The measure was introduced through amendments to Section 18 of the Sugar Act, 2001. Mr Kidero announced that Mumias Sugar spent Sh1.4 billion in buying a new boiler and turbine alternators to increase its electricity capacity to 35 megawatts.

Currently, the company produces a mere 13.6 megawatts, most of which it consumes.

The remaining 2.2 megawatts are sold to KPLC through the national grid. Once the boiler is installed, the company will increase its electricity production to 35 megawatts. Of this, about 20 megawatts will be available for export to the national grid. The increase in electricity production from bagasse – a waste product from sugar cane processing – will reduce carbon emissions in line with the UN Kyoto Protocol.

Efficiency in use of carbon-emitting products is measured in credits, which means Mumias would earn credit for that. The credit will be sold to the Japanese Company for the next 10 years, earning Mumias Sugar extra income.

Mr Kidero said that the Japanese Finance Company was giving Mumias the best deal, at Sh432 per tonne. In the 10 years that the contract will be in place, Mumias is expected to have produced 120,000 tonnes of carbon.