Firms that invest more to enjoy lower electricity bills

Power bills for manufacturers might substantially reduce following implementation of the energy rebate programme.

The plan, which was introduced in last year’s Finance Act, allows industries to deduct up to 30 per cent of their electricity expenses from their taxable income.

This would mean possible reduction in Government’s income tax from the industries but the move would also enable industries to produce more for local and export markets as well as possibly reduce consumer goods prices, which might eventually translate to more consumption taxes.

There are however tough conditions for manufacturers to meet, such as a 10 per cent increase in investments and sales every year.

The Energy ministry has gazetted the programme, paving way for cheaper power for manufacturers who have in the past cited costly electricity as among the factors that have led to Kenya being an non-competitive investment destination.

According to the legal notice, the benefits accrued will vary from one manufacturer to another, with those whose plants are operating at 100 per cent getting to deduct the maximum 30 per cent.

“A manufacturer with an actual overall performance (AOP) of 100 per cent qualifies for a maximum rebate of an extra 30 per cent of the electricity cost incurred for purposes of computation of taxable income,” said the notice by Energy Cabinet Secretary Charles Keter.

“In the first year of claim, 20 per cent of the cost of electricity from the grid will be allowed and the remaining 10 per cent by weighted key performance indicators (KPI).”

“For subsequent years, the rebate claimed will be determined by the weighed key performance indicator,” said the CS.