The recent announcement by Government to increase the prices of diesel, petrol and kerosene by 15% across the board will have negative consequences on agriculture. In farming, diesel is one of the huge expenses in the production process on farms and in the course of transporting inputs plus ferrying farm products to the markets. Consequently, the increase in fuel prices will lead to an increase in the costs of production and this will require that producer prices rise to compensate for this. However, we are all aware that, farmers are not able to pass on the full rise in cost for various reasons hence the fuel price increase is a big threat to the viability of agriculture enterprises which are already struggling to survive.
We take cognizant of the reasons advanced by Government which have necessitated the price increase. However, it is also true that the fundamental reasons driving the fuel prices upwards are not new and have been widely debated in the past to try and find a lasting solution which led to the establishment of a stabilization reserve fund (SRF). Currently there is a charge levied on fuel which goes towards the SRF. The SRF was meant to pile up stocks of fuel so that in times of shortages fuel could be released on the market to stabilize prices and also in times when fuel costs escalate, fuel stocks could be released at a lower cost. Our question is what has happened to this price stabilization mechanism? Perhaps there is need for an urgent review of the implementation of the SRF so that it becomes an effective tool of cushioning fuel price fluctuations. We hold the view that there is everything to be gained from subsidizing critical inputs in the production process because then locally grown products can remain competitive in the domestic and export markets.
Government must also consider ways of putting in place special measures to lower the cost of diesel to critical sectors like agriculture. This could be done in many ways such as by zero rating diesel for VAT purposes which would at least remove the VAT on diesel or removal of the road levy. Paying road levy on diesel which is used on farms is an unnecessary added cost on production because most farm machinery does not utilize the roads which this levy is intended for. Besides this fact, roads in the farming areas are never serviced unless paid for through farmers’ own initiative. The Union has been sounding out the farmers’ plight in view of the global economic downturn because most farm enterprises are in very difficult circumstances. Unfortunately, there does not seem to be any relief in sight.
Issued by the Zambia National Farmers’ Union