Competition watchdog says it advised against giving Rai Paper, owned by Mr Rai, exclusive rights to harvest trees on government plantations.
Rai Paper had applied for the licence from the Kenya Forest Services (KFS).
Mr Rai has multibillion shilling interests in multiple sectors of the economy.
The competition watchdog thwarted industrialist Jaswant Singh Rai’s bid to gain control of government forests last year, a new regulatory report has revealed.
The Competition Authority of Kenya (CAK) says in its latest annual report that it advised against giving Rai Paper, owned by Mr Rai, exclusive rights to harvest trees on government plantations in North Rift and Western, arguing that it would lessen competition with other saw millers in the market.
Tarlochan Limited, a company that purchased the Webuye-based Pan African Paper Mills and renamed it Rai Paper, had applied for the licence from the Kenya Forest Services (KFS).
Mr Rai has multibillion shilling interests in multiple sectors of the economy.
“The terms of licence proposed by the acquirer were likely to lead to substantial lessening or prevention of competition including foreclosing the upstream market for logging to other saw millers in the six counties,” says the CAK in the report.
Rai Paper had requested for exclusive rights in Uasin Gishu, Elgeyo Marakwet, Trans-Nzoia, Nandi, Kakamega and Bungoma.
It noted that the acquisition of the paper mill was likely to create employment opportunities for about 3,000 people in Webuye and areas bordering it.
The competition watchdog advised the KFS to set aside 25,000 hectares exclusively for the firm, leaving another 20,000 hectares for use by other players in the region.
Gazetted rates
“Material for pulpwood and fuelwood is to be sold to Pan Paper at gazetted rates so as to realise the economic value of planted trees and also ensure the same rate to all other players,” added the regulator.
The CAK urged the forest agency to ensure that the material from the woodland is only used for conversion into pulp at the paper firm.
The regulator argues that the above directive ensured 149 existent market players were not affected by its move.
Kenya’s paper industry has over the years sought protection from the government to survive cheap imports.
The Treasury recently increased duty of imported paper from 25 per cent to 35 per cent, a move expected to hurt paper converters.
Manufacturers are in talks with the Treasury in a push for revision of the 35 per cent duty imposed on imported paper.
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