Manufacturers set to get refunds on electricity bills after key talks

The Energy ministry is yet to reach a deal with manufacturers and the taxman over criteria for refunding 30 percent of electricity billed one month after the January 1 timeline.

Talks involving the ministry, the Energy Regulatory Commission (ERC), Kenya Power #ticker:KPLC, Kenya Revenue Authority, the Kenya Association Manufacturers and other stakeholders on conditions that a factory will have to meet to qualify for the electricity rebate are nearing conclusion, a forum heard in Nairobi on Tuesday.

The Finance Act 2018 requires qualified manufacturers to deduct a third of their total electricity bills from corporate profit before they pay tax to KRA in a bid to lower the relatively high cost of production for factories.

An amendment of the Income Tax Act mandated the Energy ministry to set conditions for a manufacturer to qualify for the rebate. “The high cost of energy has been a constant engagement. As late as yesterday (Monday), we were still engaging on the formula for the energy rebate,” Investment and Industry Principal Secretary Betty Maina told a conference during the launch of Manufacturing Priority Agenda for 2019.

“We will soon be announcing the formula which comes as a relief to the industry.”

A stakeholders’ meeting in Naivasha last week ironed out a number issues, KAM chief executive Phyllis Wakiaga said without being specific.

“We are hoping that it can be gazetted as soon as possible so we take advantage of it,” Ms Wakiaga said. She added that she expects the refunds to be backdated. Energy Principal Secretary Joseph Njoroge did not immediately respond to our call and a text on the same.

The refund is part of the government plan to lower the electricity cost for the manufacturing sector, a key pillar expected to generate 800,000 decent jobs for the rising graduate youth by 2022.

The Energy ministry also introduced night-time tariffs from December 1, 2017, halving the power cost for large factories operating between 10pm and 6am.

Average industrial power tariff in Kenya at $0.1365 (Sh13.67) per kilowatt-hour in January 2018 was higher than neighbouring Ethiopia’s $0.066 (Sh1.66), Tanzania’s $0.0688 (Sh6.89) and Uganda’s $0.1226 (Sh12.28).