New sugar import tax proposal raises price, supply concerns

Rising sugar import taxes raise concerns over prices and supply stability. [Courtesy]

Despite the move by Parliament to protect local sugar producers in the country, there are growing concerns over the ripple effects this move would have on consumers

As the Members of the National Assembly passed the Finance Bill, 2026, last Thursday, one of the major amendments proposed surrounded zero rating sugar transportation and increasing tax on imported sugar.

The Departmental Committee on Finance, through its Chairperson, Kuria Kimani, has proposed the introduction of a new provision in the sugar belt sector by increasing tax on imported sugar from the current Sh7.50 per kilogramme.

“The committee had proposed to increase the rates from the current rate to about Sh10, but upon consultation, we have amended it to make it Sh40 per kilogramme. This would mean all the companies producing sugar will make it easier to sell sugar in the country,” Kimani said.

But Embakasi East MP Babu Owino cautioned against the move to impose taxes on sugar, saying the consumption rate for sugar surpasses the 610,000 metric tonnes produced locally.

“We import around 505,000 metric tonnes of sugar, meaning we solely depend on imported sugar as a country. Therefore, when the Finance Committee proposes that the taxes be increased from Sh10 to Sh40 per kilogramme, Kenyan consumers will be hurt more,” Babu said.

But the Kimani claimed that Babu was referring to the 2022 figures and accused him of misleading the country on the figures.

This proposal has ignited fears among Kenyans who fear a possible sugar crisis if the tax proposal is implemented as it is.

Currently, the market power is concentrated in the hands of a few millers who claim control of over half of Kenya’s sugar production capacity. Given that Kenya consumes far more sugar than it produces, a section of sugar importers has accused sugar cartels of engineering artificial shortages by withholding sugar from the market whenever prices begin to soften.

Documents seen by sugar stakeholders indicate that imported sugar already attracts significant charges before reaching consumers.

“The result is predictable; consumers pay more while farmers receive little benefit. The same millers who successfully lobbied the government to reduce cane prices from farmers on grounds that sugar prices had fallen are now presiding over a market where retail sugar prices are climbing again,” said an industry player who sought anonymity.

Based on import parity calculations for sugar delivered to Nairobi, a tonne of imported sugar attracts freight on board costs, road or rail haulage, inspection, sugar development levy, VAT, excise duty and storage and handling charges, among others.

“This means the total landed cost is approximately $891 (Sh115,295) per tonne before local distribution and retail margins. The Sugar Development Levy alone currently imposes a four per cent charge on imported sugar, adding to the tax burden already faced by importers,” he explained.

With the Finance Bill 2026 sugar tax proposals, the situation could worsen as the excise duty on imported sugar will increase significantly, with industry estimates indicating an additional burden equivalent to roughly Sh40 per kilogramme, translating to an estimated Sh2,000 per 50kg bag of sugar.

According to industry analysts, higher prices could generate windfall profits for dominant players, but a lose on the consumers, while farmers will gain little because cane prices are not necessarily linked to retail sugar prices.

“The danger is creating a protected monopoly market where a few players determine supply and price levels,” said one industry analyst.

With President William Ruto expected to assent to the Finance Bill 2026 today, chances are Kenyans could experience another rise in sugar prices in the coming weeks.

Key industry players have called for a balanced import regime, urging the government to maintain competition, prevent hoarding and stabilise prices as opposed to a handful of dominant players gaining unprecedented control over the sugar market while millions of Kenyan families shoulder the burden through higher prices. Statistics indicate that Kenya only produced approximately 650,000 metric tonnes of sugar last year against an annual demand of over 1.2 million metric tonnes.