Maize and wheat flour prices: It seems that the worst of the hiked fuel prices isbyet to be witnessed. This is after maize millers in Kenya announced plans to increase prices of maize meal due to the new 16 per cent tax.
Cereal Millers Association chairman Mohamed Islam in a statement said maize and wheat flour processors will raise prices to reflect increased operating costs after implementation of the new tax.
The millers also cited the recent change in the Value Added Tax (VAT) status for processed wheat and maize flour from zero-rated to exempt status.
“The recent changes in the Value Added Tax (VAT) status for processed wheat and maize flour and more recently the addition of VAT to petroleum products, have left our members with little room to absorb these additional costs without jeopardizing quality and the sustainability of operations,” said Mr Islam in the statement.
The new law introduced tax exemption on supply of maize (corn) flour, ordinary bread and cassava flour, wheat or meslin flour containing either of the ingredients by more than 10 per cent in weight. The change of status means millers can no longer claim input VAT on production.
“Furthermore, the recent introduction of VAT on petroleum products has exacerbated the situation as millers and all players along the supply chain are now factoring in these additional costs in their production.”
The price increase comes as a blow to ordinary Kenyans as maize flour prices had dipped to a six-year low on increased supply of cheap grains from Uganda and harvests in Western Kenya, easing inflationary pressure. A two-kilogramme packet of some maize flour brands is retailing at Sh. 86, a price last recorded in 2012.
The imports from Uganda and local harvests have pulled down the cost of a bag of maize from Sh. 3,200 in January to below Sh. 2,000 in August, offering millers room to cut costs for consumers.
The price of bread has remained at Sh50 for months. Maize is a national staple while bread is used by majority of urban households for breakfast.
“The CMA is cognizant of inflationary pressures faced by our consumers but regrettably in light of all the above-mentioned costs, members would find it very hard to maintain current wheat and maize flour prices,” said Mr Islam.
MPs last Thursday voted to postpone the VAT for a further two years, but National Treasury CS Henry Rotich directed the Kenya Revenue Authority (KRA) to implement the International Monetary Fund (IMF)-fronted tax before President Uhuru Kenyatta had assented to Parliament’s amendments.
Activist Okiya Omtatah Tuesday failed in his bid to get a court order suspending the new tax.
The millers body said the change of this status has resulted in additional costs for grain handling, flour processing, packaging and distribution costs.
He added that millers’ transportation costs will now increase two-fold following the introduction of VAT on fuel, forcing millers to absorb the costs.
“The newly-introduced VAT on fuel will have an additional ripple effect on the cost of electricity, packaging and other costs of production that are fuel-related,” he said.