The government will offset close to Sh40 billion owed by the five sugar mills that are set for privatisation.
Privatisation Commission Chairman, Henry Obwocha said the debt is owed to the government and the Kenya Sugar Board.
The five sugar factories earmarked for privatisation are, Muhoroni, Nzoia, Chemelil, Miwani and Sony.
Obwocha said the government is keen to put to sale the factories when they have clean financial sheet. He said the debt includes tax penalties and tax interest that has accumulated over the years.
Speaking at Chemelil Sugar Company on Wednesday during a forum with farmers on the planned privatisation of the five sugar mills, Obwocha said debts owed by the miller to cane farmers would not be settled by the government.
He said that Chemelil Sugar Company owes the government and the Kenya Sugar Board Sh1 billion that will be written off by the government.
Obwocha explained that other countries are advanced in the production of cheap sugar due to technology and proper cane varieties.
He challenged sugar research stations in the country to avail fast maturing cane with high concentration of sucrose to farmers.
“The sugar research stations must pull up their socks and help farmers by availing cane varieties that mature faster but with high sucrose content,” he said.
Obwocha says after privatisation, farmers will be paid on cane delivered based on sucrose content to be able to earn more money from the cane.
Five government-owned sugar companies have a cumulative debt of about Sh100 billion. Nzoia Sugar Company, owes Sh37 billion, Miwani Sugar Company, Sh28 billion, Muhoroni Sugar Company, Sh27 billion, Chemelil Sugar Company, Sh5 billion and Nyanza Sugar Company, Sh3 billion.
Apart from the money owed by the millers to the government and the Sugar Board of Kenya, the millers (including Chemelil) owe banks, suppliers, and cane farmers.
“All public-owned mills are heavily indebted and lack the capital required to expand, modernise and automate their factories for the required efficiencies and economies of scale,” a report by the Parliamentary Committee on Agriculture, Livestock and Co-operatives says.