Government will not grant tax exemptions to Adani for JKIA deal - Treasury CS Mbadi

The government will not grant tax exemptions to Adani Holdings if they secure the deal to upgrade Jomo Kenyatta International Airport (JKIA), Treasury Cabinet Secretary John Mbadi has confirmed.

Appearing before the National Assembly's Public Debt and Privatisation Committee on Tuesday, CS Mbadi pointed out that all tax matters concerning investors would be handled according to Kenyan law.

"The tax exemption requested by Adani will be subjected to a cost-benefit analysis to determine the value it brings to Kenyans before making any decisions," he said.

Adani, an Indian conglomerate, had requested a 30-year tax relief as part of the proposed deal.

However, Mbadi clarified before the Balambala MP Abdi Shurie-led committee, that no final decision had been made regarding the JKIA upgrade project. He stressed that the project remains open to other potential investors.

"With the court halting any further dealings with Adani for now, other interested parties are free to submit their proposals. The law allows us to stop Adani if a better offer comes along. The only condition is that the new firm would need to compensate Adani for any financial expenses incurred so far," he explained.

The Treasury boss reaffirmed the government's commitment to following legal procedures, noting that the final decision on the project will depend on the court's ruling.

"We haven't concluded anything yet. We are awaiting the court's verdict, whether to terminate or continue with the process will be determined by the legal framework," Mbadi added.

Concessions

Regarding negotiations, the Treasury CS revealed that the government had successfully pushed for concessions from Adani, reducing their proposed earnings from 18 per cent to 16 per cent.

"So far, we've negotiated to bring the percentage down from 18 per cent to 16 per cent, which includes a 12 per cent base rate and a 4 per cent margin," Mbadi noted.

He explained that the government had opted for a Privately Initiated Proposal (PIP) for the airport upgrade due to financial constraints.

"The country's financial situation made it difficult to fund the project internally. If an investor is willing to finance it and we both benefit, it's a fair deal," Mbadi added

The Kenya Airports Authority (KAA), the contracting agency for the project, faced financial challenges during the COVID-19 pandemic, recording a loss of Sh4 billion.

CS Mbadi mentioned that the deal is still under review by his ministry and the Attorney General, with a memo to be prepared for Cabinet approval.

"If any legal issues arise that require terminating the deal, we will not hesitate," he assured the committee.

Acknowledging concerns over the transparency of the process, Mbadi admitted that the government should have engaged the public sooner.

"One of the main problems with this matter has been the lack of communication. I believe the public should have been involved earlier in the discussions," he concluded.