Edible Oil Manufacturers Warn of Significant Price Hikes Due to Proposed Tax Increase

By Veronicah Stellah

Thursday,30th may 2024

Kenyans should brace for challenging times ahead as prices of basic commodities are expected to skyrocket if MPs approve a proposed 25 percent increase in excise duty in the Finance Bill 2024.

Documents presented by 13 manufacturers of edible oils to a parliamentary committee indicate that the cost of imported palm oil, currently priced at $930 per barrel, would result in a 20-litre jerrican retailing at Sh6,737, up from the current Sh4,046—a Sh2,691 increase if the excise duty is raised.

Fathi Hayel Saeed, Chairperson of the Edible Oil Subsector, and Vimal Shah, Managing Director of Bidco Oil Refineries, informed the National Assembly’s Trade, Industry, and Cooperatives Committee that the tax increase would make it difficult for a family of four to afford a full meal each day, with some families potentially eating only one meal every two days.

Edibe oil manufacturers Rajan Malde (from left) Pwani Oil Products Director, Fathi Saeed, Golden Africa Kenya MD and Vimal Shah, Bidco Africa Ltd Chairman before the National Assembly Trade, Industry & Cooperatives Committee’s to discuss the skyrocketing prices of the important commodity at the Bunge Towers, Parliament.

“The cost of a 10 kg carton of cooking fat will rise by Sh1,098 to Sh3,230 from the current Sh2,132. The price of a 400g loaf of bread will go up from Sh70 to Sh80, long bars of soap from Sh180 to Sh270, chapati from Sh15 to Sh25, and mandazi from Sh20 to Sh30, as they are all byproducts of edible oils,” Saeed stated.

Manufacturers highlighted that citizens are already burdened by increased taxes, such as the housing levy and the Social Health Insurance Fund (SHIF), while the minimum wage remains approximately Sh18,000. Saeed urged MPs to reconsider the proposed excise duty on edible oils and margarines, as well as the removal of the Import Declaration Fee and the Railway Development Levy on crude oil imports, which would lead to a Sh72 saving per 20-litre jerrican.

Saeed refuted claims that the government’s imposition of excise duty on edible oils is intended to promote local manufacturing, arguing that it would instead harm local industries. “This move will now allow more imports into the country. Our question to you members is why are we destroying our very own companies with one stroke of the pen? We are calling on Parliament to intervene to ensure that this is stopped,” he said.

The Edible Oil Subsector Chairperson also called for the removal of the Nut and Oil Crop (NOCD) levy of two percent, which would result in a net saving of Sh50 per 20-litre jerrican. Additionally, the removal of the East African Community (EAC) duty, which hinders imports within the region, would lead to a Sh70 saving per 20-litre jerrican in the local market, making them more competitive in the export market. Shah noted that the cost of doing business in Kenya is higher than in Tanzania and Uganda, where incentives are provided to encourage investment.

“The decision by the government to control plastics is not tenable. Doing away with plastics as packaging containers will not work as it is more expensive to pack cooking oil in either tins or glasses, and dispensing it is impractical due to hygiene standards,” Shah added.

The National Treasury, in the Finance Bill, has proposed to reintroduce a 10 percent excise duty on plastic packaging and introduce an ECO levy of Sh150 per kilogram to promote responsible waste management.

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