Voting Closed:

VAT

Millers still waiting for tax waiver on wheat exports

Wheat millers want the government to scrap duty on wheat and return it to zero-rated Value Added Tax.

In Summary

•The cost of bread, which is also determined by the international prices of wheat, went up for the first time in four years.

•Wheat millers want the government to scrap duty on wheat and return it to zero-rated Value Added Tax.

Millers in Kenya remain optimistic that the government will waive tax on wheat imports, to enable them further reduce flour prices.

Cereal Millers Association chief executive officer Paloma Fernandes said a wheat tax waiver will cushion consumers against the grain’s fluctuating international prices.

"Removal of duty would reduce any increase in prices. This hasn’t happened yet and miller are still awaiting for government intervention to waive the 10 per cent duty," Fernandes told the Star.

According to the Kenya National Bureau of Statistics, Kenya produced  2.45 million tonnes of wheat in 2021 and imported 18.88 million tonnes to meet demand deficit.

Wheat millers want the government to scrap duty on wheat and return it to zero-rated Value Added Tax.

Their petition followed price hikes in wheat products including flour and bread .

The cost of bread, which is also determined by the international prices of wheat, went up for the first time in four years.

Nearly all brands have gone up with a 400 grammes going up by Sh10 to sell at Sh60 with 600 grammes going for Sh75 from Sh65 previously.

A tonne of wheat has increased by 30 per cent to Sh51,118 in March from Sh25,300 sparking a rally both on bakers and standard flour.

Even so, eased tensions from the Russia-Ukraine war has seen international market prices drop significantly.

The price of wheat in the global market declined by almost 40 per cent  to Sh35,995 a tonne two weeks ago. 

Kenya imports about 75 per cent of its annual demand of 1.2 million metric tonnes of wheat grain from both Russia and Ukraine.

Millers have signaled price reduction in wheat products from as early as this week.

Grain Industries Limited, the millers of Ajab Chapati Flour, Ajab All-Purpose Home Baking Flour, and Ajab Mandazi Flour are expected to lower product cost from Wednesday.

"We have already reduced our prices of wheat flour by a margin and we are expecting the price to go down further either from next week or end of this month," Grain Industries Limited communication head Shaddrack Nzai told the Star on Tuesday last week.

A bale of Ajab flour which was retailing at Sh2,360 in March has dropped to Sh2,290 in June and will be going down further in coming days.

CMA's Fernandes said Kenyans should expect post war priced wheat flour to reflect in the shelf once the next shipment arrives in to the country. She did not specify when this will be.

"Once it arrives it will reflect on the prices at that time depending on the exchange rate movement and other inflationary costs," she told the Star on Monday.

Last week, Russia, the world’s top wheat exporter, pointed to near-record amounts of wheat becoming available for shipment reversing the supply constraints that pushed up prices from February.

The price of wheat jumped 28 per cent between April and May after India also banned exportation of produce to protect its local stocks.

India is the world’s second-biggest wheat producer after China.