Kenyans will soon start paying more for unga and bread thanks to the 16 per cent fuel levy.
Last week, the Cereal Millers Association issued a notification of price increase for maize and wheat flour effective from next week. But yesterday, Agriculture and Irrigation CS Mwangi Kiunjuri downplayed the increase in unga prices, saying the ministry is yet to meet the millers.
Kiunjuri said the fuel levy will have little impact on the prices of maize flour, which currently retails at less than Sh100. He attended the official opening of the second agri-nutrition conference at the Kenya School of Government.
But CMA says the changes will depend on individual millers and the maize stock they are holding. “We will soon be meeting with the ministry to discuss this. CMA is concerned that the recent surge in the cost of production will lead to an increase in prices,” said new CMA chairman Mohamed Islam.
In a statement to the newsrooms last week, Islam said the changes in Value Added Tax status for processed wheat and maize flour and more recently the addition of VAT to petroleum products has left members with little room to absorb additional costs without jeopardising quality.
Millers could claim VAT on production of maize and wheat flour but since January the National Treasury changed the status to exempt from zero-rated. This means the millers can no longer claim VAT on production.
Islam said the change of this status has resulted in grain handling, flour processing, packaging and distribution costs feeling inflationary pressures. “Millers and all players along the supply chain are factoring in these additional costs.”
The millers add that due to the introduction of VAT on fuel, transportation costs will now increase twofold.
He said, “From the grain handling facilities to the millers and from the millers to the respective retailers whereby millers have to absorb these 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.”
Peter Kuguru, chairman of the United Grain Millers Association, said small-scale millers who make up 70 per cent of the millers in the country will meet today.