Receiver manager hopeful Mumias Sugar will soon roar back to life

Mumias Sugar Company Receiver Manager Ponangipalli Venkata Ramana Rao. [Brian Kisanji, Standard]

Mumias Sugar Company's receiver manager is optimistic that the miller will be back on its feet once the government lifts a three-month suspension on sugarcane crushing.

An acute shortage of sugarcane led to the suspension of the production of sugar to allow millers to engage farmers on how to rapidly develop cane for crushing.

The Agriculture and Food Authority (AFA) issued the directive to suspend cane crushing on July 13 during a stakeholders meeting chaired by the authority's acting director Jude Chesire. This saw major sugar millers suspend most of their operations, leaving a skeleton staff to run essential duties.

In an interview with The Standard, Mumias Sugar Company Receiver Manager Ponangipalli Venkata Ramana (PVR) Rao said the miller is also keen on a court case in Nairobi challenging the bidding process that saw Uganda investor, Sarrai Group, win a 20-year lease to run the company.

Contempt case

Sarrai’s top managers Sarbjit Singh Rai, Rakesh Kumar and Stephen Kihumba will know their fate on September 22, 2023, in regard to a contempt case against them before the High Court.

Justice Dorah Chepkwony recused herself from the Mumias Sugar lease case after she was transferred from the Milimani Courts Commercial Division leaving the fate of the trio before another judge.

Rao maintained that the bidding process that saw Sarrai take over the miller was above board.

“Sarrai offered Sh19.5 million per month and was granted the lease after evaluation and consideration of all the issues. They had proof of funds from Uganda, where they enclosed copies of deposits they hold in banks there. Sarrai was not the lowest bidder as widely suggested,” Rao said.

Mumias Sugar Company. [File, Standard]

He added: “Kibos Sugar had a lower bid than Sarrai. It offered about Sh18 million a month. There was also Pandhal Industries, which was the lowest-rated of them all. They asked for a moratorium of 18 months and offered Sh28 million from the 19th month, thereby giving a lesser figure below Sh18 million a month on evaluation.”

West Kenya offered Sh150 million a month but was disqualified on a competition basis.

“They were going to breach the provision in the Competitions Act which restricts any party to control over 40 per cent of the market, thereby making it a dominant player. Moreover, they did not provide proof of funds,” he said.

“They brought a letter from NCBA Bank which was vague and non-committal, stating they (the bank) would consider financing West Kenya in the bid subject to valuation and negotiations.”

Without prejudice

He said the letter was also issued on a "without prejudice" basis, which means the bank did not legally bind itself to finance West Kenya. 

“It was also in the public domain that West Kenya was having financial issues as they could not meet payment of a decretal sum in a judgment obtained by some former staff who had sued it for wrongful termination,” said Rao.

The other firms bidding to run the company but were unsuccessful were Devki Group, who withdrew their bid before the bidding process started, Tumaz who were disqualified because they did not provide the bid bond which was a mandatory pre-requisite, and Trans-mara which failed to provide a bid bond. 

Rao regretted that the once vibrant miller is facing unnecessary cases which are hindering its operation.

Lease award

He cited one of them as that of Dubai-based Vartox company which challenged the lease award to Sarrai Group when it had interests only in the company’s Ethanol and the Co-gen plant and not the Sugar plant and the Nucleus Estate that Sarrai was mandated to run.

In addition, Rao said that the National Treasury, which has a 20 per cent shareholding in Mumias Sugar Company, the county government of Kakamega and the majority of the seven secured lenders were in favour of the lease to Sarrai and he should be given room to operate freely.

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