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Agency initiates plan to determine cost of sugar production in Kenya

Thursday, June 6th, 2024 03:30 | By
A Tractor carrying sugarcane. PHOTO/Print
A Tractor carrying sugarcane. PHOTO/Print

The Sugar Directorate has embarked on a fresh bid to establish the cost of sugarcane production per tonne in Kenya based on fair taxation and equitable policies. Establishing this cost, it stated, is crucial for fair taxation and equitable policies, aiding in fixing fair taxes, and reviewing subsidies, and inputs.

According to the director and head of the Sugar Directorate, Jude Chesire, millers have been decrying the high cost of production for years.

“By accurately assessing production costs, policymakers can strike a balance that supports both farmers and millers,’’ he said. He admitted, however, that it is a delicate balance where economics meets sugar production and sustainability.

Sugarcane growth

For instance, proper fertilisation is essential for healthy sugarcane growth. The cost of fertilisers affects overall production expenses. Chesire noted that expenses related to pesticides, herbicides, and disease management also impact production costs.

While modern machinery, such as hauling tractors and harvesters can improve efficiency, they come with initial investment and maintenance costs. Additionally, rising energy prices for crushing, refining, and processing directly affect production costs.

The directorate’s move comes at a time when cane farmers have rejected efforts by the government to tax them. Cane farmers are strongly opposed to the government’s proposed 16 per cent Value Added Tax (VAT) on sugarcane transportation.

Led by Kenya National Sugarcane Federation Secretary-General Killion Osur, the farmers want this tax dropped, claiming it would severely impact them financially.

He emphasised that the sugarcane industry yearns for clarity in taxation and equity. Efficient logistics are crucial in reducing transportation costs from fields to processing mills. Chesire noted that understanding the new cost of production is part of broader solutions to avert these tax woes.

“We want to unravel the enigma of sugarcane production costs since the industry’s survival hinges on this delicate balance of economics and sweetness,’’ he said.

The Sugar Research Institute will lead the research to provide detailed information on production costs per tonne and promote appropriate policies to enhance industry growth. Chesire added that a team of economists, agronomists, and seasoned farmers would evaluate and establish the cost of sugarcane production per ton in various ecological zones.

“Our mission is to decode the cost of production per tonne to help inform the State properly in taxing farmers,’’ he said.

Currently, the minimum yield of sugarcane is 1.5 tonnes per acre, with a potential maximum of 63 tonnes per acre. Chesire analyzed data from different regions, including Sony Sugar, Miwani, and Ramisi, to understand production costs against market dynamics.

The cost of farm inputs such as seeds, fertilisers, and pesticides has significantly contributed to high production costs and demands scrutiny.

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