The Government will offer millers 1.7 million bags of maize as compensation for the Sh2.3 billion owed to flour processors amid criticism from small firms that the move will distort the market.
The move follows talks between the government and the millers in November on a possibility of the State using the maize at Strategic Food Reserve as compensation for the debt.
President Uhuru Kenyatta last week directed the National Cereals and Produce Board (NCPB) to release 1.7 million bags to the market at Sh1,600, valuing the grains at Sh2.72 billion. However, the small players say the lower rates will depress the market, giving the bigger firms a flour pricing edge.
Another 300,000 bags that are unfit for human consumption but suitable for animal feeds will be released at Sh1,400 each or Sh420 million.
Millers have welcomed the compensation deal, saying it shows the State's commitment to repay their debts.
“We are happy by the government decision to reduce the debt that it owes millers,” said an official of the Cereal Millers Association. The State owes about nine millers Sh2.3 billion arising from the maize that they imported and sold to the government in 2017 under the subsidy programme.
Under the subsidy deal, millers bought imported maize at above Sh4,000 and were expected to receive a rebate of about Sh1,700 per bag to allow them sell the staple at Sh90 per two-kilo packet. Maize flour had risen to Sh153 a packet following a grain shortage. The unpaid rebate has since increased to Sh2.7 billion on accruing interest.
However, small scale millers have faulted the government on the deal of Sh1,600 per bag, arguing it would offer their larger rivals an edge in pricing of flour.
“We want the government to let all millers buy maize at the existing market price other than giving it to them at Sh1,600,” said Peter Kuguru, the chairperson of the United Grain Millers Association.
“This step by the government is meant to depress the market and drive the small-scale players out of business,” he said.
But State House said the release of the maize is unlikely to influence the grain price that currently retails at between Sh1,700 and Sh1,800 per bag.
“With these interventions, I do not expect any changes in the existing price of unga,” Mr Kenyatta said last week.