Millers allay fears of hikes in flour prices

A man arranging packets of flour on a shelf in supermarket. [Jenipher Wachie,Standard]

Millers have allayed fears of a spike in prices of their products, saying they can now absorb the effects of increased Value Added Tax on fuel after the Government zero-rated cereals.

They said yesterday tax refunds would cushion their operations from VAT losses, allowing them to absorb the extra costs.

Cereal Millers Association (CMA) Chairman Mohamed Islam said an initial proposal exempting cereals would have imposed additional costs, but the decision to zero rate cereal products would eventually reduce costs.

“After the budget, we would be exempt and could not have claimed the VAT but after we were zero-rated, then this means we can claim the Vat on fuel,” said Mr Islam at a Press briefing in Nairobi yesterday on the upcoming 29th Annual International Association of Operative Millers Middle East and Africa Region Conference and Expo.

The upcoming millers’ conference is Africa’s biggest processed cereal grains forum. It will run from October 22 to 25.

The recently imposed eight per cent VAT on petroleum products, down from 16 per cent, was expected to have a bearing on the cost of grain handling, transportation, electricity, packaging and other costs of production in the value chain.

Small-scale millers have already moved to increase the price by Sh8 on the initial 16 per cent charged on VAT, promising to cut the increment to Sh4 after the tax charge was slashed by half.

Yesterday, Peter Kuguru, chairman of United Grain Millers Association, which is an umbrella body of the small millers, said they would meet the Agriculture CS Mwangi Kiunjuri today to discuss the way forward.

“A cost is a cost and in supply and demand free economy, the cost of production is passed on to the consumer. The CMA may still be having subsidised maize so it is understandable if they can absorb the cost,” said Mr Kuguru.

The big millers’ promise not to effect price hikes in the hope of recovering the additional costs on VAT refunds is despite the slow reconciliation process that has affected cash flow for some firms.