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{
    "id": 194373,
    "url": "https://info.mzalendo.com/api/v0.1/hansard/entries/194373/?format=api",
    "text_counter": 9,
    "type": "speech",
    "speaker_name": "Mr. Kosgey",
    "speaker_title": "The Minister for Industrialization",
    "speaker": {
        "id": 177,
        "legal_name": "Henry Kiprono Kosgey",
        "slug": "henry-kosgey"
    },
    "content": " Mr. Deputy Speaker, Sir, I beg to answer. (a) Yes, I am aware of the severe financial and operational problems facing Pan Paper Mills, Webuye, which may lead to its closure. (b) The major shareholders, namely, the Government and the other shareholders, have discussed the problems facing Pan Paper Mills, Webuye, quite extensively. At the moment, we have agreed to put in place short-term and long-term measures in order to remedy the situation. In particular, we have agreed to make additional equity available to the company to boost its cash flow. Discussions are also under way with the Ministry of Environment and Mineral Resources and the Ministry of Forestry and Wildlife to ensure that adequate wood is made available to the company while other modalities are being worked out. The Government is also making long-term plans to avail land to the company for growing biomass or fuel wood in order to reduce its dependence on fuel oil and electricity, which are major causes of the escalating costs of doing business. The Government is also pursuing the possibility of financial concessions to ease the company's financial burden and seek ways to improve its internal inefficiencies, so that the company is properly managed and turned around to profitable margins. Mr. Deputy Speaker, Sir, this is a very important Question and maybe, I should elaborate a little bit; with your permission. This is a very important industry. The company made several requests to the Government. On the short-term, they requested for equity participation and retention of capital. The Government has agreed to contribute about Kshs140 million in the coming financial year. They need, immediately, Kshs325 million and the rest of the money will come from the other shareholders. The Government has also agreed, in principle, to allocate about 8,000 hectares of land to 960 the company, so that it can plant fuel wood, probably eucalyptus which can grow within four to five years. This will cut down the cost of fuel by 50 per cent. At the moment, the company pays Kshs120 million for fuel and Kshs8 million for electricity bills per month. These are huge costs. Even if we were to inject more capital into the company without addressing the underlying reasons as to why the company is facing financial problems, we would not succeed. From 2005, the Government increased the price of wood from Kshs325 per cubic metre to Kshs700 per cubic metre. The Government is currently looking into this issue because it is really a constraint on the part of the company. The company also made an investment in 1984 and upgraded it in 1996 on the electricity grid from the Uganda border to Webuye. The investment is estimated to have cost the company Kshs2.1 billion. The company has not been able to get any returns from that investment. So, the company is requesting the Government to give it a concessional power tariff of about Kshs3.5 per kilowatt hour as opposed to the current figure of Kshs7.3 per kilowatt hour. These discussions are on going. Currently, the company pays duty on imported products and 20 per cent of the company's production is exported duty-free and 30 per cent is sold on the local market under tariff remission. For the remaining 50 per cent of the production, they have to compete with importers from outside the East African Community and also within the Community. The company is requesting us to increase duties on imported paper from 25 per cent to 35 per cent. The Treasury is currently looking into all these issues and many others in order to salvage or save this industry. We are really determined as a Government to do everything within our powers to save this industry. This industry is very important. It employs 1,600 Kenyans directly, plus other people who are beneficiaries of the Pan Paper Mills."
}