A plan to rescue the ailing giant Kenya Planters' Co-operative Union is ready for Cabinet approval before being taken to Parliament.

Cooperative Development minister Joseph Nyagah, though economical with details, said the rescue programme would be accompanied by stringent conditions that would streamline the management of the farmers' organisation.

The union chairman Kimanthi Mutuerandu has said that among the options being explored are a Sh1 billion grant from the government and the possibility of inviting a strategic investor.

The minister said the recommendations would turn around the floundering farmers' union weighed down by debts amounting to Sh3.7 billion.

"A technical committee finished its work and made recommendations on how we can rescue the union, and the report is in the hands of the Cabinet; I am confident that soon it will get approval," the minister said on Friday.

Mr Nyagah said the serious problems of mismanagement that exist at planters' union stem from overlapping of roles between the board and the co-op's managers, adding that these would be resolved.

"The farmers union is too important a national institution to be allowed to die, and we are aware of serious problems of mismanagement, and the role of the management and that of the board will be separated," he said.

He added that the union would review some of its by-laws to enable farmers to access information.

The minister said the report would be discussed at the next annual general meeting expected before the end of the year.

He however noted that the rescue plan does not include protection or handing the union an unfair advantage over its competitors.

"The union will be rescued without killing the competitors who are also important in the economy," the minister said.

Things at the union came to a head two months ago when 10 top managers led by managing director Peter Kimani resigned, citing intimidation by an overbearing board.

Mr Nyagah says the managers should have stayed on to assist in the restructuring of the farmers union.

The 70-year-old union, owned by some 700,000 farmers through their cooperatives, has been facing great challenges since the liberalisation of the sector in 2003, which resulted in high default rates after some of the debtors defected to the miller's competitors.

Some of the debts, estimated at Sh890 million, cannot be recovered because the debtors have since died. Of the Sh3.7 billion owed by farmers --most of them estate owners--only Sh733 million is considered recoverable.

The minister said a committee had been formed to negotiate with some of the debtors to resume repayment.

A European Union report last year warned that planters' union faced imminent collapse if drastic measures were not taken to turn it around. Among their recommendations was the selling off of idle, non-core assets in order to settle 75 per cent of the debt owed to commercial banks.

The number of employees was to be reduced to 100 from 220, and some of their perks scrapped to reflect the union's financial status.

The EU further recommended that board be cut from 15 directors to five who should be put on performance contracts. Their powers were also to be trimmed and their allowances reduced to not more than 3 per cent of the body's gross revenue.

But attempts by the commissioner of co-operatives to implement the recommendations hit a brick wall after he was taken to court by the directors, who argued he has no powers to interfere in a limited company. The union has dual registration under the Cooperatives Act and the Companies Act.

Mr Nyagah said the rescue programme had been drawn up after wide consultation among people in the sector, including scholars.

and past and current managers. It is not clear yet whether the rescue plan has adopted any of the EU recommendations.