NAIROBI, Kenya, Mar 30- The government may soon waive Value Added Tax (VAT) on locally produced and ginned cotton as a means of promoting local production.
Agriculture Minister William Ruto disclosed on Monday that he would soon present the proposal to his Treasury counterparts to consider the incentive that can go a long way in revitalising the sector.
“Ginners who buy (cotton) from local farmers have to pay a 16 VAT when they sell it to the spinners. In an industry coming out of a depression, we believe that sufficient incentives need to be put in place and the waiver of duty on locally produced and ginned cotton is a step in the right direction,” he said.
At a press conference, the Minister also announced that cotton seeds would now be produced commercially by the Kenya Seed Company while registered seed merchants would have to be certified by Kenya Plant Health Inspectorate Services (KEPHIS).
The meeting with industry stakeholders on Monday pointed out that the government’s move to provide free seeds like it had done in the past two years was no longer sustainable.
Therefore the meeting agreed that the government should contract the Kenya Agricultural Research Institute to provide the basic seeds while the seed company would produce them commercially.
They also recommended that prices of cotton be maintained at Sh30 per kilo to encourage spinners to buy from local producers.
Mr Ruto also added that there was need to raise funding for the promotion of local products which would involve imposing a levy on imported lint and textile products including second hand clothes.
Although this means that the cost of the clothes, which are popularly known as ‘mitumba’ will soon go up once the government implements the proposal, Mr Ruto said the move would benefit the over 200,000 cotton farmers.
Cotton does well in Arid and Semi Arid Areas (ASAL) and the minister saw this as an opportunity to develop these regions by enhancing incomes to the farmers and thus eliminating poverty.
“We have a duty to the farmers and the industry to ensure that we put our ASAL areas into good use by promoting the growing of crops that are drought-resistant like cotton,” he said.
Although he did not clarify what percentage the rates would be, Mr Ruto defended the decision to enforce the charge saying the duty that was already being paid on the used clothes would be directed to the industry.
Traders of these clothes claim the price of imports have gone up three fold in the last few weeks.
He observed that the implementation of these measures would bolster the sector’s turn around, which has already started showing recovery signs after government pumped in Sh750 million in the last three years.