Consumers will pay Sh160 more per litre for edible oil if a proposal of 25 per cent on excise duty on both raw and refined vegetable oils contained in the Finance Bill, 2024 sails through parliament.
Manufacturers of edible oils in Kenya Wednesday, May 29 told the National Assembly Committee on Trade, industry and cooperatives that they will have no choice but to pass the cost to consumers in the event the Bill is passed in its current form.
According to an analysis presented before the committee by the manufacturers, the retail price of a litre of edible oil which is currently retailing at Sh202 will increase to Sh335 increasing by Sh135.
At the same time, the manufacturers told MPs that one kilogram of cooking fat which is currently retailing at Sh107 will shoot to Sh162 representing an increase of Sh25.
According to the manufacturers, the price of 20 litres of cooking oil which is currently retailing at Sh4, 046 will increase to Sh6, 737 representing an increase of Sh2, 691.
The passage of the Bill in its current state will also see the price of a 10kg carton of cooking fat increase from the current Sh2,132 to Sh3, 230 representing a Sh1,098 increase.
“Edible oil constitutes a substantial cost in the preparation of foods and delicacies for hotel and catering industries. The taxes will increase the cost of hospitality and have a significant impact on our tourism industry,” Mr Vimal Shah of the Bidco oil refineries told MPs.
Mr Shah who was accompanied by Rajan Malde, Director Pwani Oil Products and Fouad Saheed and other representatives of the 13 oil refineries criticised the government for neglecting local manufacturing and instead preferring to give incentives to foreign companies.
“As local manufacturers, we have zero incentives, the incentives are only given to American companies and others,” he added.
Mr Shah said while other countries such as Tanzania and Uganda are giving local manufacturers incentives, Kenya is introducing more levies to them.
“Kenya has more levies than Uganda and Tanzania, we are not competitive at all. We are not opposed to taxes but why can’t we tax the end product because when you tax at the production level, you kill the local manufacturers,” Mr Shah said.
He pointed out that in Uganda for instance, they have been given incentives and free land with 99-year lease while in Kenya they applied to be given land for 25 years to grow raw materials for the production of edible oils but they are yet to get an answer.
The manufacturers called for the removal of the 2 per cent levy implemented through the Nut and Oil Crops Directive (NOCD) on all crude oils to promote local processing.
They said if all the new levies as proposed in the Bill are removed, consumers will get a relief of Sh200 in the 20-litre oil.
They attributed the increase of edible oil in the recent past to the global rise in the price of crude palm oil, increase in input costs such as fuel, a 2 per cent levy implemented through the NOCD), a 10 per cent duty on packaging materials and the global rise on freight rates.
Clause 42 of the Bill seeks to amend the first schedule to the Excise Duty Act to impose 25 per cent on both raw and refined vegetable oils.
The Bill also seeks to introduce an eco-levy of Sh150 per kg on all articles of plastic packaging materials.
Further, the Bill seeks to amend section 7 of the Miscellaneous Fees and Levies Act to increase the Import Declaration Fee (IDF) from the current 2.5 per cent to 3 per cent.
Aldai MP Marianne Kitany who chaired Wednesday’s session said they will take up the 3 percent levies saying it risks killing the local industry if implemented.
She termed the concerns raised by the manufacturers as genuine, expressing fear of the likelihood of an increase in edible oil prices.
“We are leaving this meeting concerned that the cost of oil could go up and that is our worry. From the discussion we’ve had, it’s clear there is no communication between the manufacturers and the government,” Ms Kitany said.
The committee resolved to convene a roundtable meeting between the manufacturers and the Ministry of Finance to find solutions to some of the concerns raised.
