Battle for sugar moves to Parliament House

The furore over the exemption of duty on industrial sugar has moved to Parliament with industry players keen to put up a spirited fight for its reversal.

Members of Parliament from sugar growing regions are expected to vigorously oppose the proposal contained in the 2009/2010 Budget speech on the basis that it would portend a hammer blow for the already struggling industry.

Signs that MPs have started exerting pressure on Finance minister Uhuru Kenyatta were apparent in the House last Thursday.

“We need to protect our farmers even as we protect our manufacturers,” Rangwe MP Otieno Ogindo told Parliament.

In his budget speech, Mr Kenyatta held that lifting the levy would result into lowered production costs while urging producers to pass on the benefits to consumers.

Already, the Kenya Sugar Board and lobby group, the Sugar Campaign for Change, have opposed the proposals.

“We urge the minister to review this proposal since it will only work against the sector that is aiming for reforms,” the regulator’s chairman, Okoth Obado, told the Sunday Nation.

Exaggerated

However according to Mr Philip Muema, a tax consultant with KPMG, the uproar is exaggerated. Speaking to the Sunday Nation, Mr Muema held that millers should instead up their game.

“It is clear that Kenyan millers cannot produce the sugar and the minister recognised the role it plays in our manufacturing process, therefore there is nothing absolutely wrong,” said Mr Muema.

The Sugar Development Levy (SDL) is currently a consumer-based tax charged at the rate of 4 per cent on the ex-factory price of sugar at the mills and 4 per cent on the Cost Insurance & Freight (CIF) of sugar imported into the country.

The Sugar Development Fund was established in 1992 with the objective of creating a revolving fund to finance the industry’s activities.

The Fund is financed through a levy charged on both locally produced and imported sugar. The levy on locally produced sugar is collected by sugar factories on behalf of the Fund, while that on imported sugar is collected through contracted agents.

“SDF’S main objective is to give more financial assistance and advisory services to the industry to boost sugar production,” says the Sugar Act.

But even in Parliament, Mr Kenyatta has maintained that the tax break is beneficial to manufacturers who use industrial sugar.

But despite the minister’s proposals, some soft drink manufacturers are yet to effect it and bring down their prices.

Industrial sugar is mainly used in the production of soft drinks and confectionary and is not largely produced locally. However, often it finds its way into local markets as table sugar.

Consequently by virtue of its lower total importation costs, it sells below the prices of locally produced sugar. On the spot have been players in the hospitality industry who prefer it to normal table sugar.

“If let to pass then the industry will stand to lose a lot as various elements of improvement will have to be scaled down giving rise to reliance on imported sugar,” said Mr Obado.

As Parliament debates the budget, Mr Kenyatta could be in for a tough battle to have the proposal passed.

source: dailynation