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Processors warn of looming surge in edible oil price

Tuesday, May 21st, 2024 01:30 | By
Edible oil manufacturers have called on MPs to consider the plight of consumers as they debate the bill that proposes a 25 per cent excise duty on the oils and other raw materials.
Edible oil manufacturers have called on MPs to consider the plight of consumers as they debate the bill that proposes a 25 per cent excise duty on the oils and other raw materials. PHOTO/Print

The price of edible oil is likely to surge by up to 80 per cent if the Finance Bill 2024 which is proposing a 25 per cent excise duty on vegetable oil and other raw materials is passed.

Edible oil manufacturers have therefore called on members of parliament to consider the plight of consumers as they debate the crucial bill. The Edible Oil Manufacturers Association of Kenya warned that if passed in its current form, the Finance Bill 2024 would push up cooking oil prices by 80 per cent.

The association said in a press statement that the bill proposed a 25 per cent Excise Duty on vegetable oils which it noted as not well thought out and will have serious effects on production of the important commodity. If the bill comes into effect, the manufacturers fear it will pave the way for taxation on both the finished products and the raw materials.

“If implemented, this excise duty will trigger an unprecedented surge in the price of cooking oil, a staple in Kenyan households,” stated the association in the statement. It added: “The cost of this essential commodity is projected to skyrocket by 80 per cent, rendering it unaffordable for millions of Kenyans, particularly low-income earners and small-scale traders, commonly known as ‘hustlers’ and mama mbogas.”

Further, the association noted, cooking oil was integral in the preparation of other products and will lead to the skyrocketing of related edible and non-edible food products. They warned that with the new proposed tax, the price of bread, which uses cooking oil during the baking process, will increase by Sh10 while a bar of soap will rise from Sh180 to Sh270.

They projected that the price of margarine will double to retail at Sh300 from Sh160. Consequently, the price of other products including mandazis, chapatis, and chips will go up. “Such price hikes will disproportionately affect the most vulnerable members of society, exacerbating the already high cost of living and plunging millions into deeper financial distress,” added the statement.

 Local value addition

“The 25 per cent excise duty threatens to dismantle the government’s own agenda of promoting local value addition in agribusiness and could stymie the growth of local edible oil production,” the association said.

It further believes that if passed, the bill will put over 40,000 jobs at risk and some companies will be forced to scale their workforce, therefore worsening the unemployment rate in the country.

“It is worth noting that the edible oils sector is a significant contributor to Kenya’s economy, directly employing approximately 10,000 individuals and indirectly supporting over 30,000 jobs. The proposed tax risks decimating these livelihoods and destabilising the manufacturing industry at large,” the manufacturers explained.

The association, therefore, called on the government to reconsider the move to introduce excise duty on edible oil as it risks killing the otherwise important industry. The Agriculture and Food Authority (AFA) last year announced plans to increase Kenya’s edible oil production from five to fifty percent in the next five years. The authority attributed the high imports of 95 percent to low production despite the country having a great potential in the region.

Agriculture Cabinet Secretary Mithika Linturi said early this year that edible oil is one of the food items that have a huge weight in Kenya’s food import bill.

The country’s annual consumption for edible oil is an estimated 900,000 metric tonnes against a national production of 80,000 tonnes of domestically produced edible oil crops.

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