GOVERNMENT has removed the subsidy on maize, a move likely to trigger an increase in mealie-meal prices.
The State has also revised the Farmer Input Support Programme (FISP) in which farmers would now be paying double for inputs effective this marketing season.
The maize subsidy, known as millers-consumer subsidy, was the money that the Government availed to enable millers to maintain stable prices of mealie-meal sold to consumers.
Agriculture and Livestock Minister Bob Sichinga announced the Cabinet decision to remove the subsidy, a move he said was aimed at reducing losses that the Government had been incurring on the whole exercise.
Mr Sichinga said this at a media briefing yesterday where he also announced the 2012/2013 crop forecast survey and the food basket status.
The minister also announced the re-alignment of the FISP and the Food Reserve Agency (FRA).
He said the Government, through the FRA, had for a long time been incurring losses when buying maize from small-scale farmers at a higher price and selling it at a lower price.
"Cabinet has reluctantly authorised the removal of the miller-consumer subsidy. The implication of this removal is that the price of our staple food mealie-meal will inevitably have to rise," he said.
He tabulated how much the FRA original budget had been exceeded by high percentages from 2009 to 2012, rising as high as 2,632 per cent.
In 2009 the FRA budget was exceeded by 21.6 per cent, in 2010 it was 2,632 per cent, in 2011 it was 2,114 per cent while in 2012 it was 732.7 per cent.
He said if the subsidy was to be maintained, FRA would continue to be in a loss-making position.
Mr Sichinga said FRA had been buying maize at KR65 and selling it to millers at KR60, with a resultant loss of KR5 for every 50 kilogramme bag sold or KR100 per tonne.
He said a multi-sectoral and multi-disciplinary team was being constituted to work out the detailed modalities and the pricing structure of mealie-meal.
The FRA, he said, would this farming season purchase 500, 000 tonnes of maize and any maize that would be left after the private sector buys the grain from the farmers.
He said the floor price for maize would, however, be maintained at KR65.
The minister said under the re-aligned FISP programme, the price of a bag of fertiliser had been adjusted from KR50 to KR100 and that the Government would give the seed pack under the programme for free.
Government has also introduced a barter system under the programme where 659, 000 out of the 900, 000 farmers would be allowed to barter for fertiliser.
"This would work as follows: Two 50kg bags of grade A maize grain in exchange for one bag of fertiliser both basal and top dressing.
"Government will offer to subsidise 100 per cent the 10kg seed pack. In other words seed would be provided for free," Mr Sichinga said.
He said the remaining 241, 000 farmers under the FISP programme would be incorporated in the implementation of the e-voucher system, a subsidy management system aimed at responding to the weaknesses identified in the programme.
Mr Sichinga said the e-voucher system would allow the private sector to participate in the input marketing system and enable gradual withdrawal of Government from the physical supply of inputs.
Meanwhile, Mr Sichinga announced that the official crop production for the 2012/2013 farming season had declined by 11 per cent and stood at 2,532,800 tonnes, which was marginally lower than the estimated national annual maize requirement of 2,534,000.
He noted that although maize production did not perform well in some areas, other crops like soya beans, sunflower and mixed beans did well.