Maize flour price to double as government abandons rebate

February 5, 2009: A price surge was on Wednesday looming in the maize flour market after the government withdrew the Sh200 rebate it was offering millers for every bag of maize.The subsidy had been aimed at making the staple more affordable to the majority of Kenyans who had in November complained that prices had risen beyond their means.Millers on Wednesday said they had been informed at a meeting with Agriculture minister William Ruto of the decision to withdraw the rebate, leaving the pricing to market forces.No reasons were given for the sudden withdrawal although the government was understood to have been unable to shoulder the financial burden.The announcement was immediately followed by a warning from millers that the price of the staple could rise beyond the Sh120 per two kilogramme bag that prevailed before the subsidy was announced. Although the government has waived duty on the grain, it is unlikely to stop an upward revision in prices in the face of a shortage.

On Wednesday, however, the National Cereals and Produce Board (NCPB) denied that it had stopped supplies to millers at subsidised price.“We are still giving millers maize at Sh1, 750. The SGR board of trustees have allocated the maize and NCPB awaits to collects and the miller shave not collected the maize.” A spot-check in some outlets on Wednesday revealed that key brands were missing from the shelves and prices of those available had increased.“To alleviate the current supply situation, we need subsidies to allow maize imports to reach the millers at Sh1, 750 and keep consumer prices low,” said Ms Paloma Fernandes, the chief executive of the Cereals Millers Association.Until last week, the ex-factory price of maize flour was Sh65 per two kilogramme. They now range between Sh90 and Sh95, up from Sh72 per two kilogramme packet. The millers were by then getting maize at Sh1, 750 for processing the subsidised flour and at Sh1, 950 for commercial supplies. This had led to a confusing two-tier pricing structure with the subsidised selling at Sh130 per five kilogramme bag and the normal flour at Sh72 per two kilogramme bag.

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