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Opinion & Analysis

EDITORIAL: Subsidy plan has proved to be a costly exercise

Agriculture Secretary, willy Bett. FILE PHOTO | NMG
Agriculture Secretary, willy Bett. FILE PHOTO | NMG 

Reports that grain farmers have rejected a government plan to buy maize at Sh3,200 per 90 kilogramme bag are not surprising.

Despite the government’s proposed price being six per cent more than last year’s when the National Cereals and Produce Board paid Sh3,000 per bag, the farmers argue that they deserve more.

Their cereals lobby argues that they should not be paid less than Sh3,500 per 90 kilogramme bag.

A study found that the cost of producing a 90 kilogramme bag of maize was Sh2,200 this year. This means that farmers stand to make Sh1,000 for every bag of maize sold to the NCPB. According to the Agriculture ministry and Egerton University’s Tegemeo Institute, the cost of producing a 90 kilogramme bag of maize is Sh2,257.

The fact remains that the maize subsidy programme rolled out by the government to tackle rising food prices was not well thought out.

Kenya is facing a serious shortage of grain, which saw the price hit a record high Sh153 per two-kilo packet of maize flour. The subsidy scheme subsequently lowered the price to Sh90 per two-kilogramme packet.

The scheme has turned out to be very costly as the government rushed to ensure that the rising food prices did not become a major election issue.

However, the fact remains that the food production exercise has been very expensive for the government.

It subsidises the farmers at the maize production stage then buys the same maize from farmers at a higher than market price and then subsidises the flour sold to consumers.

It has proved to be a very messy and costly public policy move by the government.

As a result, the government is caught up in a tricky position where it is anxiously hoping to halt the subsidy programme at the end of the month while still ensuring that retail flour prices do not increase. It has already set aside Sh7.1 billion to buy 2.4 million bags of maize in a bid to replenish the Strategic Food Reserve.

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