Memorandum submitted by the National Farmers'
Union
The NFU submitted its main body of evidence
on 24 October in the form of a Joint Memorandum signed by the
National Farmers' Union and the Freight Transport Association.[1]
The following constitutes additional information pertaining more
specifically to the farming sector as opposed to the more general
supply chain issues raised in our other body of evidence.
The Joint Memorandum dealt with the high cost
of "white" diesel used by general road vehicles mainly
used for the commercial carriage of goods.
The farming industry also utilises a special
fuel that is dyed and chemically marketed, it is generally known
as "red" diesel because of its unique colouring. During
the fuel crisis there were many stories in the general media and
quotes about red diesel usage in farming that were both misleading
and inaccurate.
Red diesel is an important industrial fuel used
in many business sectors. The following are key facts relating
to the cost and use of that fuel:
— Duty is levied on red diesel, it
is simply at a lower rate of 3.13 pence per litre.
— Red diesel is used by farmers to
power many types of stationary farm machinery such as grain dryers,
conveyors and generators. Tractors, combines and self propelled
sprayers also use red diesel.
— Road use of tractors, combines, self-propelled
sprayers etc using rebated fuel is minimal, hence the appropriate
duty rate applied, and there is little evidence of abuse of the
system. The penalties for misuse are more than adequate to discourage
misuse. Customs and Excise have the powers to fine, levy back
duty and impound vehicles.
— Red diesel cannot be used in lorries
or 4WD vehicles to transport livestock or produce to market.
— Farming is not the only industry
to use red diesel. For example, it is widely used in the construction
industry with limited on road use, it is also widely used by local
authorities for gritting/snow ploughing, fresh/frozen produce
suppliers in the refrigeration equipment of their trucks, train
operating companies in their locomotives.
— Other fuels for industry also have
low duty rates or are duty free. For example lubricating oil and
aviation turbine fuel are NIL rated for duty purposes.
The cost of red diesel has more than doubled
over the last 15 months. In the current climate there is no opportunity
to pass this cost on through the supply chain.
The NFU has some 60,000 full farming members.
Over the last three months we have received a vast amount of fuel
pricing information from farmers. There is evidence to suggest
that many oil companies in the UK are operating a differential
pricing regime against commercial users of fuel, whether they
are farmers or indeed any other type of commercial user.
At the beginning of September the NFU's President,
Ben Gill, wrote to the Chief Executives of the key UK motor fuel
suppliers expressing deep concern at these pricing practices.
It is the NFU's view that industry is being
disproportionately hit by spiralling fuel costs. The last few
weeks have seen retail prices at the pump rising slowly whilst
industrial users are facing almost daily increases in bulk purchase
prices.
It is imperative that account be taken of the
fact that:
— Raising bulk prices is a further
blow to an already beleaguered industry.
— The competitiveness of UK agriculture
relies on fairness in pricing of input costs. Fuel is a key input
and its price must be contained.
When the spot price of crude rises the bulk
price of fuel increases almost simultaneously. This is inequitable
given the amount of crude already available in the supply chain
at the point of the spot price increase. Most farmers regard this,
quite frankly, as profiteering. It is putting unbearable pressure
on many of our members' businesses and it must cease.
31 October 2000
1 See page 67. Back
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