Federated Farmers transport spokesperson Karen Williams says her farm’s fuel costs for the three months during peak harvest almost doubled year-on-year.
The Government’s decision to cut road user charges (RUC) by 36% for three months is cold comfort for contractors and farmers using off-road vehicles that will not qualify for the exemption, Federated Farmers says.
The cut, which will take place from late April to late July, is in response to the spike in global fuel prices. Transport Minister Michael Wood said the change was to support the road transport industry.
For the arable industry, the reduction in charges is too late for this season, with much of the harvest already completed apart from harvesting maize grain, Federated Farmers transport spokesperson Karen Williams said.
On Williams’ own farm, fuel costs for the three months during peak harvest had almost doubled from $4000-$7000 a month in 2020 to $8000-$9500 a month this year.
“Seed, fertiliser and fuel are our three biggest costs and they have all skyrocketed,” Williams said.
It will also affect farmers undergoing cultivation and sowing for autumn crops.
On the positive side, the news was pleasing for farmers spending large sums of money to fuel their utes or cars for trips to towns, she said.
The cut in costs came from a reduction in RUCs, rather than the base price the Government pays for diesel and other taxes on top of that.
That base price was not being reduced and there are no additional levers the Government could pull regarding that base price.
“We buy the diesel and if the vehicle is used on the road, we buy our road user charges which the Government are going to ramp back, but the base cost of diesel is not being reduced so our key food production machinery – the likes of tractors and combine harvesters – will not see the benefit of this reduction,” he said.
For this reason, Rural Contractors New Zealand (RCNZ) chief executive Andrew Olsen said he was disappointed with the news.
The organisation’s members’ farm machinery will not qualify for the RUC reduction or the 25 cents cut to the Fuel Excise Duty.
He said prior to the latest announcement, they had been in contact with the Government to see what could be done to support the industry.
“We’ll be going back to Government,” Olsen said
“We’ve come to the end of harvest and it might be too little too late to do, but it sets a precedent of pulling a lever to reduce costs where a significant group of users have been overlooked and we still want answers on how that could be addressed in the event that prices increase for next season.”
Williams agreed and questioned whether there was a chance of reduction being extended if the Ukrainian conflict continued.
“How do we ensure we can keep being a productive sector? We need fuel to produce food and if things start to get unaffordable, it will have a huge social impact with food production, access and getting food to the right places and affordability of food for all of our people,” Williams said.
Olsen said one potential solution could be to temporarily remove the 20c fuel levy paid towards the ETS.
For those contractors still working the harvest or having to undergo autumn cultivation or sowing, they will have to make sure they are making good business decisions around the price shock, its impact on business and customers. It was not an enviable position, he said.
The Government’s move coincided with Waka Kotahi’s start of consultation with the public around changes to regulatory fees and charges.
“It’s an interesting perfect storm in the middle of record inflation and price rises,” he said.
Olsen said removing contractors from the RUC exemption so they would qualify for the discount was not an option either because they were only operating on roads for a tiny fraction of the time. For the vast majority of the time, the vehicles are used inside the farm gate.