Senators want troubled Mumias Sugar Company to publicly advertise its lease bidding process and conduct a fresh technical evaluation within 14 days.
While appearing before the Agriculture Committee on Wednesday, PVR Rao was put on the spot by the legislators who decried lack of transparency in the process.
“It is due to lack of public participation that things have gone to this level,” nominated Senator Naomi Shiyoga said.
Lawmakers also stressed that because Mumias Sugar has a wide asset base, its recovery strategy required a professional technical evaluation, rather than a simple estimation.
Committee members pointed out that the receiver manager should consider the interests of farmers and other stakeholders.
“The country is unhappy with the way the bidding process is being conducted. There are concerns that what you are doing is not transparent. It is very opaque,” Senator Njeru Ndwiga, the committee chairman, said.
“Within 14 days, the receiver manager should publicly advertise the lease and submit a technical evaluation report before the Senate.”
No winning investor yet
The bidding, which Mr Rao indicated was still open, has attracted eight investors. But he dispelled rumours that an investor had already been picked.
“We have not identified any particular investor who can operationalise the lease at the moment. We have the bids but we have not finalised the evaluation yet. Nobody has been awarded the bid,” he said.
Bidding was conducted through a private treaty, he said, because a public advertisement would be expensive and lengthy. But senators criticised the process as unjustified, saying it denied Kenyans the constitutional right to public participation, even though Mumias Sugar is a private company.
Senators also claimed that some of the foreign companies that sent bids lacked proof of their capacity to revive the miller, raising the question of how the firms knew about the leasing without a public advertisement.
“Some of those companies that bid, most are from India and most of them don’t deal with sugar. Some deal with cables and their portfolios show some have even 10 employees,” Kakamega Senator Cleopas Malala claimed.
The committee had invited the management of KCB Bank to respond to the issues together with Mr Rao. But the lender declined the invitation on Monday, arguing that the issues raised would be comprehensively addressed by the receiver manager.
The committee said it wants be involved in the leasing process henceforth to ensure the public interest and other concerns are addressed.
Senator Malala lamented that residents of Kakamega, many of whom are farmers who supply cane to the miller, had not been involved in the process.
“Even if it is under receivership, Mumias does not operate autonomously. The company’s current state is causing suffering to the people of Kakamega,” he said.
The committee asked Mr Rao to also issue a public statement clarifying that the lease bidding had not been concluded, following rumours that steel manufacturer Devki Group had been awarded the bid.
Devki, owned by steel tycoon Narendra Raval, last week issued a public announcement indicating that it had withdrawn from the bidding due to the public outcry it had attracted.
“However, given the ongoing public interest which the matter has attracted and the call for a publicly run bidding exercise, we have found it worthwhile to take out our application,” Mr Raval said in a statement on June 4.
Mr Rao, however, told the committee that Devki is yet to submit an official withdrawal letter. He said the bidding that started last year was still underway, without a definite date on when the process would end.
Another issue the senators raised was the estimate that the miller requires between Sh3 billion and Sh4 billion for its revival.
“You cannot just wake up one day and decide that Mumias requires Sh3 billion to be revived without a professional technical evaluation,” Kitui Senator Enoch Wambua said.
Leasing details include a lease period of 15 to 20 years. Mr Rao reassured them that only an investor with great financial and technical muscle to steer the miller back to life would be awarded the lease.
“The company’s liability has increased by Sh200 million over the 20 months I have been there,” he said, indicating that debts Mumias owed to KCB had increased from Sh2.6 billion when he was appointed to Sh2.765 billion now.
Since taking over management of the miller, Mr Rao ran distillery operations until February this year, when the factory experienced a shortage of molasses, leading to its closure and the sacking of 800 workers in April.
Issues concerning Mumias Sugar’s leasing have recently drawn fury from different stakeholders, including residents and political leaders from the western region, amid claims of conflict of interest.
The company was put under receivership by KCB in September 2019 due to the billions of shillings it owed the bank and other lenders. By June 2018, it owed Sh12.5 billion.
Last year, the Kenya Revenue Authority waived Sh11 billion that the miller owed it as part of the strategy to revive it.