The government has been called on to do more to address the rising costs of inputs for farmers, particularly the cost of agricultural diesel as harvest season ramps up.
Deputy Martin Kenny asked the finance minister this week to reduce the price of such diesel to below to €1.20/L, as its cost has doubled in the space of a year.
The consequence of not doing so will impact crops harvested and saved for next year as farmers and contractors struggle to meet this unavoidable cost.
Speaking in the Dáil last night (Tuesday, June 14), the Sinn Féin TD said he had attended an Irish Farmers’ Association (IFA) meeting at Ballymote Mart the previous evening where one of the main issues of concern was the price of agricultural, or green, diesel.
“The point that the farmers made was that at the moment, the price is €1.50/L. This time last year, that was 78c/L. So it has doubled,” he said.
“This is an issue that needs focus and while the government has said it has done little bits with excise duty [on agricultural diesel], the reality is that enough is not being done for the sector that is going to need some break in relation to these costs.”
While the Fine Gael finance minister, Paschal Donohoe, was not present in the Dáil to engage with Deputy Kenny, he was represented by Minister of State, Deputy Damien English.
The deputy explained that this area is being reviewed on an ongoing basis by government, and gave the impression that some action may be taken as the budget is prepared for next year.
“I understand the pressure that farmers and contractors are under,” Deputy English said.
“This is well flagged to government and this whole area is being kept under review, and all the various government departments are feeding into the budget process now trying to focus on how best to respond to this,” he added.
Agri-diesel and other costs
Despite recent headlines that identify some areas within the sector as performing strongly, with incomes up on last year, Deputy Kenny pointed out that it isn’t as positive for others when the increase in input costs is considered.
He said there is a lot of pressure on farmers at present to grow more, produce more, and contribute to our food security – against the backdrop of the war in Ukraine.
Farmers can and will respond to the demand on them, but they need help, Deputy Kenny said.
“If they can produce the goods, they will do that but they need to get a break regarding costs, especially the green diesel.
“There is no point reducing it by 5c/L or 10c/L and then coming along with a carbon tax and putting it up again,” he said.
Responding, Deputy English said that the government acknowledges the pressure that is on the agricultural sector.
“Agriculture and food production were major assets to the country as we came out of the last financial crash and in this recovery they are valuable too, and we want to work with them and alleviate some of the pressure.
He said that while there is a real issue with rising fuel costs, “we are living in unprecedented times” and there are “limitations to what government can do”.
“It can’t completely insulate sectors of the economy from the impact of issues such as the war in Ukraine, which is completely outside of its control.”
He then went on to outline the measures that government has taken so far in relation to the reduction in excise duty on agricultural diesel.
“As regards the application of excise on agricultural fuels, the Finance Act 1999 provides for the application of excise duty in the form of mineral oil tax (MOT), which includes motor or heating fuels. MOT comprises a carbon and non-carbon component.
“The carbon component is often referred to as a carbon tax and the non-carbon component is referred to as fuel excise or fuel duty.
“Diesel used for certain purposes, for example in agricultural machinery, may qualify for a reduced rate of MOT. Such diesel must be marked by prescribed fiscal markers and is referred to as marked gas oil (MGO), green diesel, or agricultural diesel.
“The current reduced rate of MOT that applies to the marked gas oil is €111.14/1,000L. This is considerably less than the standard rate of MOT on diesel, which is €405.38/1,000L,” Minister English explained.
He said that in March 2022, the Minister for Finance introduced cuts to MOT rates on petrol, diesel, and MGO. He also introduced a further cut to the MOT on MGO, which is in place from May 1 to October 11. This applies to the non-carbon component of MOT and fully compensates for the carbon-tax increase, he said.
“As a result, all MGO users benefit from a cut of 5c/L VAT incl. (from May to October). In addition to this, farmers can also claim a tax deduction for expenditure on MGO.
“In computing their taxable farming profits, farmers may also benefit from a relief provided by [Section 66 4a of] the Taxes Consolidation Act 1997, which allows farmers to claim additional deduction on the MGO, which amounts to the difference between the carbon tax charged and the carbon tax that would have been charged had it been calculated at the rate of €41.30/1,000L, which would have been the 2012 baseline figures.”
MOT law provides for relief from the carbon component of the MOT for biofuels that are made of animal or vegetative origin, Deputy English explained.
- A fuel that is made entirely of biomass is liable for the non-carbon component of MOT only;
- For a biofuel used in place of MGO, the MOT carbon component is fully relieved;
- And for blended fuels containing biomass, the relief applies to the portion of fuel that meets the biofuel criteria set out in the MOT legislation.
This biofuel relief is intended to promote a higher level of biofuel in fuel sales and supports the government’s commitment to incentivise the use of greener alternatives to fossil fuels, Deputy English stated.
Back to reality
Responding, Deputy Kenny said that while all the above is to be commended, the reality for the farmer, right now, is that diesel is costing twice the price
“That is the reality and I think there needs to be a check on that,” he said.
“It’s at €1.50/L now, it needs to go to at least €1.20/L. That is still a very, very large increase on last year, but that is what we need for farmers to be productive into the future.”
Not acting now will have knock-on effects in the form of harvest problems or potential fodder shortages, he warned.
“The reality is that for a lot of farmers, in my part of the country, involved in sucklers and sheep, their income is very low, and even if it trebled – nevermind going up 30-40% compared to last year – they would still be on a low income. When you add up the hours of input, they are well below the minimum wage.
“They need to see a commitment from government that they will bring the price of agricultural diesel to below the €1.20 mark.”
Deputy English said he couldn’t give that commitment, as much as might like to, but that he it would get “absolute attention” from Minster Donohoe.