Crude duties to cost edible oils sector more

Kenya’s  Ministry of Investment, Trade & Industrialisation Cabinet Secretary Moses Kuria has added fireworks to the unfolding edible oils importation saga by issuing a letter recommending the removal of the 35 percent import duty on edible oils and add a 10 percent export and investment promotion levy.  

In a  letter signed  Tuesday, June 20, the Minister, who is in the eye of a storm over the essential commodity scandal has blamed the edible oils value chain for the high cost of foodstuffs. “ The edible oils value-chain continues to be a major contributor to the net cost of basic food commodities in the country”,  the letter says.

Kenya spends an estimated Ksh 102 billion in crude oil imports, a situation Mr. Kuria charges are drawing back government efforts to reduce the cost of the essential commodity.

It is a confused directive, says an economist familiar with government policy.  The Economist points out it is not clear from the CS letter whether the 35 percent duty is being removed on crude oil or finished products!   The statement, “Remove 35 percent duty on crude oil and introduce a 10 percent exports and promotion levy on imported crude oil” is totally confusing.

In a fast, sharp rejoinder, players in the edible oils value chain have termed the action a deflection of the unfolding saga over crude importation of oil by firms contracted by the Kenya National Trading Corporation as reported in sections of the media this week.

Asks the economist, “ Why doesn’t the government give the special edible oils permits to the existing manufacturers to bridge the shortage instead of letting in traders who are only interested in making a quick profit at the expense of consumers and the manufacturers?

Fear has gripped the edible oil manufacturers following the Kuria letter proposing the removal of the 35 percent duty on edible oils which, they say could flood the markets with imports rendering the industries redundant. “ We are staring at massive losses of the industrialisation capacity and  10,000 jobs,”  a leading manufacturer who requested anonymity said.

Furthermore, the 35 percent duty on crude palm oil importation is agreed under the East African Community,  to spur local production of oil crops therefore, any change must go through the regional C Common  Customs Union Protocol.

Essentially, the Moses Kuria proposals are interpreted to mean;- remove duty from imported ready-packed oils and finished products from the current 35 percent and making it free to import. Add 10 percent additional tax on crude palm oil which is imported by the whole industry locally to process in Kenya.  Makes the import of crude oil more expensive, and makes imports of finished products cheaper.

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