Milk imported from East African counties has been slapped with a fresh tax that is bound to increase its price.
The move is part of efforts to protect the local dairy industry.
President Uhuru Kenyatta yesterday announced the introduction of a 16 per cent Value Added Tax (VAT) on milk products that have originated from countries in the East African Community (EAC).
He also gave orders for powdered milk which does not conform to the country’s standards to be impounded.
“Our farmers have continued to get high milk yields, however, due to the excess supply, they are receiving very low prices,” said Uhuru.
“The situation has been exacerbated by the incursion of powdered milk which is smuggled into Kenya from outside our East Africa region. This has caused financial hardships to dairy farmers.”
Uganda has emerged as one of the leading importers of milk into Kenya in the past few years.
The new VAT is likely to stoke disquiet in Kampala since both countries are members of the EAC customs union, which means they should enjoy harmonised tariffs on goods traded across the border.
An analysis by The Standard newspaper last year found that while the price consumers pay for milk has been rising steadily in the past few years, earnings that accrue to farmers have registered subdued growth.
According to the Kenya National Bureau of Statistics, the average cost of half a litre of milk has increased by more than 20 per cent between 2014 and 2018.
It now retails at Sh60.
Farmers on the other hand continue to earn Sh35 per litre of raw milk supplied, a Sh7 increase over the past decade.
The industry is also dominated by a few processors who absorb over 90 per cent of the total milk that is available for sale.
These processors include Brookside, New Kenya Cooperative Creameries, Githunguri and Kinangop.
Do not miss out on the latest news. Join the Standard Digital Telegram channel HERE.