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Crude Duties to Impose Higher Costs on the Edible Oils Sector

The edible oils importation issue in Kenya has taken an unexpected turn with the recent actions of Moses Kuria, the Cabinet Secretary for the Ministry of Investment, Trade & Industrialization. In a letter issued on Tuesday, June 20, Kuria recommended the elimination of the 35% import duty on edible oils and proposed the introduction of a 10% export and investment promotion levy.

Kuria, who is currently embroiled in controversy surrounding essential commodity scandals, blamed the high cost of foodstuffs on the value chain of edible oils. According to him, the edible oils sector significantly contributes to the overall cost of basic food commodities in the country. He expressed concern that Kenya spends approximately Ksh 102 billion on crude oil imports, undermining the government’s efforts to reduce the cost of this essential commodity.

However, an economist familiar with government policy criticized the directive as confusing. The economist pointed out that Kuria’s letter did not clearly specify whether the 35% duty would be removed on crude oil or finished products. The statement, “Remove 35% duty on crude oil and introduce a 10% export and promotion levy on imported crude oil,” lacked clarity and created ambiguity.

In response to Kuria’s proposal, stakeholders in the edible oils value chain accused the government of diverting attention from the ongoing crude oil importation scandal involving companies contracted by the Kenya National Trading Corporation. They questioned why the government did not grant special edible oils permits to existing manufacturers to address the shortage, instead of allowing traders who are solely focused on making quick profits at the expense of consumers and manufacturers.

The edible oil manufacturers are now fearful of the consequences of Kuria’s letter, particularly the removal of the 35% duty on edible oils. They believe this move could flood the market with imports, rendering local industries redundant and leading to substantial losses in industrial capacity and 10,000 job cuts.

Furthermore, it should be noted that the 35% duty on crude palm oil imports is part of the agreement under the East African Community to promote local production of oil crops. Any changes to this duty must go through the regional Common Customs Union Protocol.

In essence, the proposals put forward by Moses Kuria can be interpreted as follows: remove the duty on imported packaged oils and finished products, reducing the current 35% duty to zero; impose an additional 10% tax on imported crude palm oil, which is used by the entire local industry for processing in Kenya. This would make the importation of crude oil more expensive while making imports of finished products cheaper.

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