Essar set for final talks with Treasury on KPRL exit

Officials of Indian firm Essar Energy are expected in the country for final negotiations with the Treasury on their underway exit from joint ownership of the Kenya Petroleum Refineries (KPRL).

Finance PS Kamau Thugge on Wednesday told the House Committee on Finance, Planning and Trade that the Treasury had set aside funds to buy out Essar from their 50:50 joint ownership of the Mombasa-based oil refinery.

“Negotiations on Essar exit has taken place and agreement signed by us. Essar Energy officials are arriving tomorrow (Thursday) from India for final talks and possible signing and closure of the exit agreement,” he told MPs.

Dr Thugge said the Treasury, the Attorney General and the Ministry of Energy officials would meet Essar Group and expects that the Indian firm owners would sign the exit agreement.

“The funds to pay them (Essar Energy) are included in government investments vote of Sh12 billion.

“They will be paid this financial year if they sign the exit deal. The negotiations had not been concluded. We hope to conclude and sign agreement on Friday to enable us to pay them off,” he said.

The MPs directed the Treasury to give a detailed breakdown of Sh18.9 billion set aside for transfer to government agencies including the Kenya Revenue Authority (KRA).

The committee asked Dr Thugge to breakdown the Sh16 billion earmarked for transfer to KRA in the financial year starting July.

The House team also directed the PS to give an explanation on the Sh12 billion set aside in the current financial year for government investment.

The committee chaired by Ainamoi MP Benjamin Langat questioned the block figures in the Treasury budget presentation as opposed to the itemised allocations.

“Looking at this block figures, I have every reason to believe that you have something to hide. We gave KRA Sh15 billion in the current budget and they are now asking for Sh16 billion. What was this money used for or will be applied to?” Mr Langat asked.

Dr Thugge said most of the money in the government investment vote is held for transfer to a number of parastatals undergoing reforms like African Peer Review Mechanism.

“We must get demand notes for us to pay. We also hold money for constitutional commissions and parastatals like National Housing Corporation,” he told the committee which scrutinised Treasury budget for 2015/16 financial year.

READ: Kenya to buy Essar’s KPRL stake for $1.7m

The MPs questioned the low absorption of funds by the ministry saying 62 per cent usage of the total budget a month to the end of financial year was unacceptable.

“This low absorption rate is not good for Treasury. We also want to know how Sh7 billion for leasing of police vehicles and Sh6 billion for insurance for civil servants was spent,” Mr Langat said.

Committee member Jimmy Angwenyi sought to know how the ministry will absorb the remaining 38 per cent of the budget in the next one month when they have been unable to achieve it in 10 months.

“Generally, all your absorption rates other than the ones that have gone to parastatals are below 50 per cent. What is your average absorption rate?” he asked.

Dr Thugge said most activities and development project are waiting for payments to be made. He said the ministry had spent 66 per cent on recurrent budget and 32 per cent on development vote.

“If you look at our unspent budget, it includes Equalisation Fund that lies with Treasury. The regulation to operationalise the fund is lying in Parliament and the failure to spend the money is not our fault,” he said.

He also pointed out that the Contingency Fund is also catered for in the ministry budget and that this had not been spent because there were no contingencies in the current fiscal year.