KAM welcomes power review directive

October 8, 2008
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, NAIROBI, October 8- The Kenya Association of Manufacturers (KAM) has lauded the recent directive by the President that levies and taxes on electricity be reviewed.

However, KAM Chief Executive Officer Betty Maina says the proposal to have two new companies to deal with electricity transmission and geothermal generation is ill advised.

Energy Minister Kiraitu Murungi had announced on Tuesday that the two companies would be mandated with the construction of transmission lines and geothermal exploration respectively.

He argued that within the current structure, Kenya Power and Lighting Company, the distributor, is overburdened with costs of constructing transmission lines. Mr Murungi further said the government intends to take over exploration of geothermal, explaining that many new investors shy away from explorations due to the high costs.

Speaking to Capital Business, however, Ms Maina insisted that there could be a case for geothermal generation but the electricity transmission company does not make good economic sense.

“There is no merit in unbundling transmission, setting up a new company and employing a group of people which will cost the taxpayer a lot of money because this company will again charge KPLC for this service and pass it on to consumer,” Maina noted adding that separating functions to that detail was not necessary for an economy that needs the generation of 1500 MW of electricity only.

Ms Maina instead proposed strengthening departments within the parent companies thus making it cheaper for the tax payer.

Meanwhile she asserted that manufacturers cannot wait for the presidential directive on taxes to be effected in order to ease the current high cost of production.

“In my simple calculations I think it will come down to a reduction of about 70 cents per unit most probably from corporate taxes, VAT and all taxes on fuel used for electricity generation,”she noted.

The Energy Regulatory Commission (ERC) on Wednesday was definite that there would be a reduction on electricity tariffs after a review on the 16 percent Value Added Tax (VAT).

Speaking on the sidelines of the ongoing National Energy Conference in Nairobi, ERC Chairman Hindpal Singh said domestic consumers “will see a direct reduction on the cost of power”.

“Consumers using more than two hundred units per month will definitely see a deduction on what they pay for electricity,” he explained.

Recently the Government introduced a 21 percent rise in electricity tariffs, which coupled with other charges led to an almost doubling of electricity bills.

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