The more than 260, 000 small-scale tea growers in the country will have to pay more for fertilizer after the National Treasury failed to factor in subsidies for the essential input in the 2015/2016 budget.
The increment hits farmers hard, barely a month after the World Trade Organisation Ministerial Conference, which among other concessions, settled that African countries scrap agricultural subsidies.
Kenya spends KSh3 billion on fertilizer subsidy as well as KSh1 billion on certified seeds.
In 2014/2015, farmers received a KSh321 fertilizer subsidy per 50kg bag of DAP.
Former Agriculture Cabinet Secretary Felix Koskei had promised KSh500 subsidy this year, which could have sliced the prices further for the farmers.
KTDA imported 64, 200 metric tons (1.3m bags) of fertilizer between July and August last year for distribution across the country.
A Sang'anyi Tea factory farmer Andrew Chuma told FarmbizAfrica that he had to part with KSh700 extra per bag by the end of 2015.
"In 2014/2015, we paid KSh1,800 per 50Kg bag of fertilizer. But this year, I have had to pay KSh2,500 for each bag. This is actually eating into our earnings, compounding losses incurred when tea is in surplus, or during drought," he said.
Chuma, who hails from Nyamira County, said fertilizer prices slightly vary in cost according to the distance from Mombasa to the factory.
During the WTO ministerial conference held in Nairobi in December last year, ended by securing an historic agreement on a series of trade initiatives.
Christened the “Nairobi Package”, it contained contains a series of Ministerial Decisions on agriculture. These included a commitment to abolish export subsidies for farm exports, which Director-General Roberto Azevêdo described as the “most significant outcome on agriculture” in the organization’s 20-year history.
“WTO members — especially developing countries — have consistently demanded action on this issue due to the enormous distorting potential of these subsidies for domestic production and trade,” he said.
The agreement was reached at after a number of countries were found to have been using export subsidies to support agriculture exports. The legally-binding decision would eliminate these subsidies and prevent governments from reverting to market-distorting export support in the future.
In the decision, developed members committed to remove export subsidies immediately, except for a handful of agriculture products, and developing countries will do so by 2018.
Developing members will also be allowed to cover marketing and transport costs for agriculture exports until the end of 2023.
This means that the Sh3 billion Kenya spends on fertiliser subsidies and the Sh1 billion certified seed support can be factored into the budgets of national or county governments until 2023.
The fertilizer subsidy program in Kenya began in the 1970s, and has implemented by state organs like the National Cereals and Produce Board and KTDA, who have been given the support to sell the product at low prices.
Aid agencies and Western governments have often taken issue with the practice and in 1980’s there was increased pressure for African governments to drop it, noting the programs discouraged private sector businesses.
A number of countries dropped their subsidy programs due to the pressure, but some to disastrous consequences.
Malawi, for instance, followed the recommendations to eliminate fertilizer subsidies, and ended up suffering food shortages in 2005, following terrible harvests. The government later reinstated fertilizer subsidies and good harvests were recorded in following years.