The government has grudgingly conceded that the price of maize flour is likely to go up over the 16 per cent Value Added Tax (VAT) on petroleum products, which came into effect on September 1. Agriculture Cabinet Secretary Mwangi Kiunjuri who was responding to questions from journalists yesterday, however, downplayed the likely effect of the fuel tax hike on food prices.
“We do not expect the increase of VAT to have great impact on the price of unga. But it is common sense, we do not expect the millers, both large and small-scale millers, to start unilaterally increasing maize flour prices because VAT has gone up,” he said.
Kiunjuri said the ministry is yet to meet Cereal Millers Association (CMA) which announced that its members plan to increase prices for maize and wheat flours as a result of the tax.
“However, soon we will have a meeting with the millers with a view to agreeing on what is possible in the middle of the VAT increase,” he said after opening the 2nd National Agri-Nutrition Conference at Kenya School of Government.
A spot check by People Daily in most of the retail outlets within the central business district revealed that the price of a 2kg packet of maize flour costs less than Sh100. But food value chain players said that the increase of unga at the retail level signals hard times to majority of Kenyans, mainly the low-income earners as the increase of VAT has already destabilised their purchasing power.
Last week, CMA chairman Mohamed Islam said introduction of VAT on fuel has exacerbated the situation as millers and all players along the supply chain are now factoring in these additional costs in their production.
“The changes in VAT for processed wheat and maize flour and more recently the addition of VAT on fuel, has left our members with little room to absorb these additional costs without jeopardising quality and the sustainability of operations,” said the chairman.