Sugar industry stakeholders have expressed concern over government’s proposal to double excise duty on sugar from Shs100 to Shs200 per kilogram, warning the move could depress sugarcane prices and further strain farmers already grappling with rising production costs.
The Shs200 rate is a concession after farmers and industry leaders successfully lobbied against an earlier proposal to raise the duty to Shs300 per kilogram. But growers say even the revised rate will hurt.
‘We pushed for the tax to remain at Shs100 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 chairs the Greater Mukono Sugarcane Growers Cooperative Society Ltd, urged government to accompany any tax measures with interventions that protect farmers’ incomes and address the controversial 5 per cent sugarcane trash deduction imposed 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 hike risks shifting the burden onto farmers because cane prices are tied to sugar 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 the proposal comes as farmers grapple with rising costs of fertilisers, agrochemicals and fuel, which have already squeezed profit margins.
The average farm-gate price of sugarcane currently stands at about Shs125,000 per tonne, down from around Shs175,000 a decade ago. Industry players fear the duty increase could exert further downward pressure on cane prices.
Robert Atugonza, chairperson of Masindi Sugarcane Growers Association Limited in Bunyoro, said the formula used to determine cane prices is based on the net sugar price after taxes.
‘The more taxes imposed on sugar, the less money remains to be shared between millers and farmers. The proposed increase of Shs100 per kilogram means farmers stand to lose about Shs9,000 on every tonne of cane supplied,’ Atugonza said.
Atugonza, a council member on the Uganda Sugar Industry Stakeholders Council representing farmers in Bunyoro and Tooro, said farmers are not opposed to taxation but want support measures.
‘We are not opposed to taxation, but the government should avoid overburdening farmers who are already spending heavily on fertilisers, transport and labour. Increasing taxes without corresponding support measures will only weaken the sector,’ he said.
David Christopher Mombwe, chairperson of the Busoga Sugarcane Growers Association, said farmers are effectively bearing the cost of both VAT and excise duty through the pricing formula.
‘Government should first establish who is actually paying these taxes before increasing them. As farmers, we sell raw cane and do not engage in sugar processing, yet the taxes ultimately affect the prices we receive,’ Mombwe said.
Godfrey Biriwali, chairperson of the Greater Busoga Sugarcane Farmers’ Union, warned farmers could abandon cane growing if concerns over pricing and the 5 per cent trash deduction are not addressed.
‘You cannot reap where you did not sow. Government and millers should first implement the agreed cane pricing formula and remove the 5 per cent trash deduction before introducing new taxes,’ Biriwali said.
‘Without action on these issues, we shall embark on a massive sensitisation campaign urging farmers to grow other crops instead of sugarcane. Farmers cannot continue producing at a loss while more deductions and taxes are imposed on them,’ he added.
Uganda’s sugar industry supports thousands of farmers and workers, particularly in Busoga where cane remains a major economic activity.
Industry players are urging Parliament and the Ministry of Finance to reconsider the proposal before it is implemented, warning that failure to address farmers’ concerns could accelerate a shift to alternative crops and further reduce production.
The proposed excise duty increase is among tax measures intended to boost domestic revenue and help finance the Shs84.3 trillion national budget for 2026/27.
Government has allocated Shs2.26 trillion to agro-industrialisation in the same budget, the highest allocation ever to the sector. But stakeholders argue higher taxation on sugar could undermine those efforts by reducing incentives for production and lowering incomes at farm level.