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Economy

KAM seeks 43pc power price cut after night tariffs failure

Electricity at present costs industries an average of $0.16 (Sh16.59) per unit.
Electricity at present costs industries an average of $0.16 (Sh16.59) per unit. FILE PHOTO | NMG 

Kenyan manufacturers are pushing for a 43.75 per cent reduction in the cost of power to place them on the path of delivering President Uhuru Kenyatta’s target of 800,000 decent jobs for the rising graduate youth by 2022.

The sector, which forms the core of Mr Kenyatta’s economic pillar under the Big Four Agenda, wants the cost of electricity to be fixed at $0.09 (Sh9.33) per kilowatt-hour (KhW) to boost domestic factories’ competitiveness.

Electricity at present costs industries an average of $0.16 (Sh16.59) per unit. According to the Kenya Association of Manufacturers (KAM), this is way above the charges in regional markets.

Mr Sachen Gudka, KAM’s chairman, said factories in Ethiopia, which are in exports business pay $0.03 (Sh3.11) per unit, over four times less than what their counterparts pay in Kenya. The power charges for other factories, however, doubles to $0.06 (Sh6.22) for other non-exports manufacturers.

The price for industries in Uganda is about $0.05 (Sh5.19) per unit, while it costs $0.06 (Sh6.22) in Burundi, Mr Gudka said.

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An analysis by the African Development Bank in 2017 put industrial power tariff in Kenya at $0.1365 (Sh14.16) per unit, higher than Ethiopia’s $0.066 (Sh6.84), Tanzania’s $0.0688 (Sh7.13) and Uganda’s $0.1226 (Sh12.71). “What Kenyan manufacturers crave is we get to a fixed rate of $0.09 per kilowatt-hour,” Mr Gudka said.

“We need to make a concerted efforts to change our mix of power, retire some of our old legacy agreements on thermal power and boost competitiveness for manufacturers.”

The Energy ministry introduced night-time tariffs from December 1, 2017, halving power cost for large factories operating and producing between 10pm and 6am over and above their daytime optimal capacity.

Starting this financial year, all factories will also claim a third of their total cost of power to be deducted from corporation tax paid to the Kenya Revenue Authority (KRA), meaning only profitable firms will benefit.

The power rebates rules stipulate that all manufacturers will get a 20 per cent refund on their power costs, with the remainder 10 per cent dependent on annual turnover, power consumption and capital expenditure.

“The conditions for night-time tariffs are not practical. Essentially, they said they were going to reduce night-time tariff, but in reality, it has not happened. There are too many vague conditions,” Mr Gudka said.

Low energy costs, he said, will boost local production of some of the commodities largely ordered from abroad such as iron ore and textiles.

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