The Association of Farm and Forestry Contractors in Ireland (FCI) has urged the government to postpone an increase in carbon tax on agricultural diesel or marked gas oil (MGO) until later this year.
The association has written to Minister for Finance Michael McGrath and Minister for Agriculture, Food and the Marine Charlie McConalogue calling for the increase, due to take place on May 1, to be deferred until October 1.
Due to the wet weather, it is estimated that agricultural contractors have completed less than a third of their normal spring work by this week.
“Agricultural contractors have experienced the most difficult season in many years due largely to weather conditions and the impact of the calendar farming rules,” FCI said.
FCI
The association said that contractors’ turnover and cash flow has been “significantly reduced, while costs have increased due to the piecemeal nature of work activities that could not be completed and invoiced in the due time”.
The FCI pointed to the knock-on effect on fuel suppliers with concern that credit terms to the sector will be reduced.
“For many agricultural contractors there will be difficult decisions to be made about the future viability of their businesses as a further fuel cost increase is due.
“Fuel usage from early May when the next tranche of carbon tax increase is planned and when Teagasc advisers are suggesting the first cut of silage be made, can be expected to cost in excess of €30,000 per week,” it said.
The FCI said that adding 2c/L plus VAT to agricultural diesel at this time will have “a hugely negative impact on cash-flow” in the sector.
It estimated that this additional carbon tax payment will add an estimated €10 million to fuel costs for contractors.
The association added that it will not be possible to pass this increase onto farmers who are already “struggling to cope with the costs of a lengthy winter animal feeding period”.
FCI said that the current situation may force many contractors to consider if they have adequate funding to provide silage contracting services in May.
It warned that this could in turn impact on fodder supplies next winter and spring.
Carbon tax
Against this background, FCI requested that the ministers postpone the next carbon tax increase on agricultural diesel until October 1, 2024, when some cash flow will have returned to the sector which employs almost 5,000 people.
“It will impact on the survival of many family-run smaller businesses based across rural Ireland that provide cost-effective, technology-based, machinery efficient services to Irish farming to support Ireland’s world-class food exporting industry,” FCI said.
The association also called on Ministers McGrath and McConalogue to work together on support systems for registered agricultural contractors.
“These supports will be a combination of a new Strategic Banking Corporation of Ireland (SBCI) state guarantee fund to allow farmers to have suitable cash-flow specifically to pay their agricultural contractors within 30 days of completing work in 2024, plus working capital for agricultural contractors,” it said.