Uganda sugar stakeholders warn proposed excise duty hike could cut farmer earnings, depress cane prices
Uganda’s sugar industry stakeholders warn that a proposed excise duty increase could reduce cane prices, strain farmers, and weaken production in key growing regions.
UGANDA – Sugar industry stakeholders in Uganda have raised concerns over a government proposal to increase excise duty on sugar from Ugx 100 (US$0.027) to Ugx 200 (US$0.055) per kilogram, warning that the move could depress sugarcane prices and worsen financial pressure on farmers already struggling with rising production costs.
The revised Ugx 200 (US$0.055) rate follows earlier lobbying by farmers and industry leaders who successfully opposed a proposed increase to Ugx 300 (US$0.082) per kilogram. However, growers say the revised level still poses a significant threat to their incomes and the wider sugar value chain.
“We pushed for the tax to remain at Ugx100 per kilogram because any increase directly affects farmers. Millers deduct taxes before calculating farmers’ share, meaning the burden is eventually passed on to growers,” said Julius Katerevu, chairperson of the Uganda National Association of Sugarcane Growers (UNASGO).
Katerevu, who also leads the Greater Mukono Sugarcane Growers Cooperative Society Ltd, urged government to introduce protective measures for farmers alongside any tax adjustments, including addressing the 5 per cent sugarcane trash deduction applied by some factories.
“Farmers are already operating at a loss and sugarcane supplies are declining. Government should ensure that the cost of production is protected and that growers receive a fair return on their investment,” he added.
Isa Budhugo, a member of the Uganda Sugar Stakeholders Council, said the proposed increase risks shifting the tax burden onto farmers due to the direct link between sugar prices and cane prices.
“Increasing the excise duty on sugar from Shs100 to Shs200 per kilogram will ultimately hurt sugarcane farmers. Since cane prices are determined by sugar prices, the higher tax could either force millers to raise sugar prices or lower the prices paid to farmers,” Budhugo said.
He noted that farmers are already grappling with rising costs of fertilisers, agrochemicals and fuel, which continue to reduce profitability across the sector.
The average farm-gate price of sugarcane currently stands at about Ugx 125,000 per tonne, down from around Ugx 175,000 a decade ago. Industry players fear the proposed duty increase could further suppress prices and reduce farmer returns.
Robert Atugonza, chairperson of Masindi Sugarcane Growers Association Limited, said the pricing structure leaves farmers exposed to post-tax sugar market movements.
“The more taxes imposed on sugar, the less money remains to be shared between millers and farmers. The proposed increase of Ugx 100 per kilogram means farmers stand to lose about Ugx 9,000 on every tonne of cane supplied,” Atugonza said.
Stakeholders have urged Parliament and the Ministry of Finance to reconsider the proposal before implementation, warning that failure to act could accelerate a shift to alternative crops and reduce national sugar output.
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