Treasury fights billionaire Rai on leasing Mumias


Tycoon Jaswant Rai. FILE PHOTO | NMG

The Treasury has opposed West Kenya’s bid for lease of Mumias Sugar Company #ticker:MSC on concerns that its billionaire owner Jaswant Rai could be keen to derail the revival of the ailing miller to protect his factories.

Treasury Principal Secretary Julius Muia says in court documents West Kenya would likely focus on protecting its market share and raw materials -- sugar cane -- instead of reviving Mumias Sugar.

This is the first time the State has directly opposed the bid by West Kenya, which has challenged the lease to Uganda-based Sarrai Group associated with Jaswant’s brother, Sarbi Singh Rai.

“That I verily believe that a direct competitor of Mumias Sugar Company Ltd (MSCL), especially one that has mills within the same vicinity as MSCL and competes with MSCL for resources including raw materials for sugar production, is unlikely to have the best interest of MSCL due to conflict of interest," Dr Muia says.

The High Court has already issued orders stopping Sarrai Group from proceeding with revival plans.

The Ugandan-based miller reportedly hit the ground running on December 22 after winning the bid to operate the ailing miller.

The Treasury has backed the position of the receiver-manager, Ponangipali Rao, who shepherded the lease process and has defended the award of the deal to Sarrai.

The miller was in September 2019 placed under receivership by KCB Group #ticker:KCB to protect its assets and maintain its operations.

Mr Rao told the court how it treated all the eight firms that showed interest in running Mumias Sugar for 20 years against an eight-point marking scheme.

The scheme included proof of funds, experience in running similar operations, lack of conflict of interest and bid bond of Sh500 million—which the bidders would surrender should they fail to deliver on the terms.

Mr Rao says that Sarrai emerged top among the three firms that made it past the technical valuation stage, with its experience in running three sugar plants in Uganda with a crushing capacity of 19,000 tons daily, power and ethanol plant making it stand out.

Other firms that sought the lease were Devki Group, Transmara Sugar, Kruman Finances, Pandhal Industries and Kibos Sugar.

Mr Rao reckons that five of the firms failed to meet the technical evaluation criteria, leaving three —Pandhal Industries, Kibos Sugar and Sarrai — to battle it out for the deal.

Transmara Sugar and Kruman Finances failed to submit the Sh500 million bid bond, while Devki Group, which is associated with steel tycoon Narendra Raval, withdrew from the race.

Mr Rao says that some of Tumaz & Tumaz bid documents including registration documents and its audited accounts were submitted after the bidding deadline of August 31.

West Kenya was locked out at the technical stage out of fear that offering it Mumias would cement its dominance of the sugar market, breach the competition law and present a conflict of interest in the revival of ailing miller.

Jaswants’s stable includes Sukari Industries and Olepito.

Mr Rao says that the Rai empire would have controlled 41.95 percent of Kenya’s cane crushing capacity.

"There was apprehension that West Kenya could submit a spoiler bid in order to gain access to Mumias, which is a competitor, and destroy it," said Mr Rao.

He argued that Jaswant was keen on protecting the source of cane for its two plants, which are less than 40 kilometers from Mumias Sugar.

The court was told that West Kenya did not offer evidence of how it would pay Sh1.8 billion annually for the Mumias Sugar lease.

Jaswant’s court fight deepened his rift with his brother Sarbi.

The Rai family is also engulfed in a vicious court fight over the distribution of wealth left behind by their patriarch, Tarlochan Singh Rai, who died on December 28, 2010, in Mumbai, India.

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