Farmers face a difficult season next year after Parliament reduced funds for fertiliser subsidy by Sh900 million in what will see more growers buy the input at market rate.
Treasury had allocated Sh5 billion for fertiliser and seeds subsidy for the year starting July, but Budget and Appropriations Committee has reduced it to Sh4 billion.
Parliament has the final say on the expenditure items on the national budget and the cut implies that quantities of cheaper, subsidised fertiliser bought through the National Cereals and Produce Board (NCPB) will reduce.
“Sh900 million from the fertiliser subsidy in the crop development and management be deducted and re-allocated,” noted Budget documents tabled in Parliament Thursday evening.
The cash will be used in the revamping of the ageing Kenya Meat Commission and boost production of livestock vaccines.
The subsidised fertiliser costs Sh1, 800 per 50 kilogramme bag compared with market rate cost of Sh3,000.
Farming accounts for a quarter of Kenya’s annual economic output, but the high cost of fertiliser means farmers rely on subsidies or avoid using them, which hurts output.
Kenya plans to encourage local production and blending of fertiliser to help cut import costs and reduce subsidies needed to make the input affordable for poor farmers.
The government has spent more than Sh16 billion to subsidise fertiliser in the last three years.
A newly built fertilizer plant in Eldoret has started selling its produce at Sh3,000 per 50 kilogramme bag.
Japanese conglomerate Toyota Tsusho, which owns the Eldoret blending plant, hopes to upgrade the manufacturing plant in the second phase of its construction at a cost of Sh123 billion.
Kenya will benefit from cheaper fertiliser once the Eldoret plant is upgraded to a manufacturing factory.
“The next step now is to manufacture fertiliser,” Agriculture Cabinet Secretary Willy Bett said earlier, adding that production of fertiliser could start in 2020 once the country starts production of hydrocarbons.
Kenya is seeking to develop oil reserves found in recent years, and the minister also pointed to some gas finds.
Ammonia for fertilisers can be produced from hydrocarbon feedstocks such as natural gas and oil.
Kenya as for long had plans to put up a fertiliser plant to cut prices of the input, whose high cost inflates food prices.
In 1975, the government had picked KenRen, an American firm to manufacture fertiliser for domestic and export markets.
However, the deal which cost taxpayers tens of millions of shillings never materialised.