Carol Nolan (Laois-Offaly, Independent)
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120. To ask the Minister for Agriculture, Food and the Marine if he will address the concerns that agricultural contractors are facing in terms of unprecedented input costs that are leading to major instability within the sector; and if he will make a statement on the matter. [27216/22]

Carol Nolan (Laois-Offaly, Independent)
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What measures will the Minister take to address the unprecedented and significant input costs our agricultural contractors are facing? The Association of Farm and Forestry Contractors in Ireland, FCI, has highlighted its concern for the sector's viability, stating the sector is under increased pressure and that, in addition to the supply issues, the significant fuel costs are making the situation impossible for contractors. It has become a crisis. What measures is the Government currently taking to support the sector and what measures could it take?

Charlie McConalogue (Donegal, Fianna Fail)
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I thank the Deputy for posing this question. In the context of the Ukrainian crisis, significant implications are being seen across all sectors, including the agrifood sector. As well as the immediate humanitarian crisis that is facing us and that must take priority, we need to take the necessary steps to ensure food security is maintained in the period ahead.

The impact the illegal war in Ukraine is having on our farm families is the number one priority for me and the Department. At farm level, the crisis has been impacting significantly on the price of fertiliser, animal feed and fuel. Within the Department, I have established a rapid response team to monitor actively the impacts on the agrifood supply chain and to contribute to the whole-of-government response. I have established the national fodder and food security committee, headed by Teagasc under Professor Frank O'Mara and chaired by Mr. Mike Magan, and tasked it to prepare an industry response and develop contingency plans and advice to assist farmers in managing their farm enterprises over the coming months. I have also announced a number of measures over the past three months to assist the agricultural sector and am currently considering, and will continue to monitor, what additional measures may be necessary.

One of the main input costs for contractors is fuel, which has been subject to significant price rises in recent months. While primary responsibility for the taxation of fuel lies with the Minister for Finance, I continue to work closely with him to ensure the tax code reflects the Government's priorities for the agrifood sector. I am working closely with the Minister of State, Deputy Heydon, in advocating for that.

Ireland's taxation of fuel is governed by EU law, as set out in the energy tax directive, and the Finance Act 1999 provides for the application of excise duty in the form of mineral oil tax. As the Deputy will be aware, gas oil that qualifies for a reduced rate of mineral oil tax is marked green and is usually referred to as marked gas oil, MGO, known as green diesel or agricultural diesel.

Additional information not give on the floor of the House

Mineral oil tax is comprised of a non-carbon component and a carbon component. The carbon component is commonly referred to as carbon tax and the non-carbon component is often referred to as excise. In March, the Minister for Finance reduced the excise rate on agricultural diesel by 2 cent per litre and then again by an additional 3 cent from 1 May. This total reduction of 5 cent reduces the non-carbon component, or excise, to nil. The current rate of mineral oil tax on agricultural diesel is €111.14 per 1,000 litres. This compares favourably with the current rate applied to auto diesel, which is €405.38 per 1,000 litres.

It should be noted that those who incur expenses in respect of farm diesel in the course of farming or the trade of agricultural contracting may claim an income tax or corporation tax deduction for these expenses, including any carbon tax charged in respect of the diesel.

I continue to engage with all stakeholders and continue to work across Government and with our European partners to respond to this crisis, using all of the tools at our disposal. I am taking a proactive approach to the crisis in Ukraine. We must protect our agrifood sector through this period of significant upheaval.

Carol Nolan (Laois-Offaly, Independent)
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I thank the Minister for his response, but the Ukrainian crisis was not responsible for the introduction of the carbon tax, which has crippled agricultural contractors and had pushed many of them out of the sector before the Ukrainian crisis ever erupted. This Government blames either a crisis or the EU, but it needs to take responsibility and implement clear measures to support this sector.

Has the Minister met the farm and forestry contractors, who are in a deep crisis? They are facing more than a doubling in the price of MGO, known as green diesel, since January. MGO is used in the machines that provide services to thousands of farmers in every townland throughout Ireland. FCI research has shown that, during 2021, its members were being quoted an average MGO bulk delivery price of 75 cent per litre, plus VAT, with slight variations throughout the year. In recent weeks, quotations have risen to nearly double that and now average €1.30 per litre, plus VAT. This is the highest ever price quoted for MGO for farm and forestry contractors and we need action from the Government.

Charlie McConalogue (Donegal, Fianna Fail)
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There have been intensive engagements between my team and contractors on the issues facing the latter. I will meet them shortly to discuss the challenges further. Due to the fact that excise duty on green diesel is much lower than on auto diesel, the capacity to make changes in that excise duty is limited. We applied significant cuts to standard diesel and standard petrol in response to the fuel challenges, but we also reduced the excise rate on agricultural diesel by 5 cent - 2 cent initially and a further 3 cent subsequently. While this reduction was small in terms of its impact on farmers and contractors, it represents the removal of the majority of the excise.

A large contracting expense on farms is silage. Importantly for the year ahead, I have introduced a €1,000 support for farmers to help cover the increased cost of contracting prices.

That is a significant measure which I hope will help in this regard.

Carol Nolan (Laois-Offaly, Independent)
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The Minister made reference to limited capacity to reduce the excise duty on agricultural diesel. That suggests to me the Minister could have gone further than the 2 cent reduction. I ask him to go further and to make sure he takes measures that will assist this sector, which, as I said, is in deep crisis.

I ask that an additional matter be considered. Farm Contractors Ireland, FCI, is requesting that farming and forestry sector fuel supply requirements are prioritised, given that contractors need supply. These requirements need to be prioritised as essential in the event of national fuel shortages. The FCI fears that the national silage harvest could be compromised, leading to a fodder shortage in winter 2022 and spring 2023. It has also asked for the Government to remove immediately the carbon tax from the marked gas oil used in agriculture and forestry by farm and forestry contractors for a period of five years in order to reduce costs and allow adequate time for the international machine development and supply sector to provide alternatives to internal combustion engines. I ask the Minister to consider those measures.

Charlie McConalogue (Donegal, Fianna Fail)
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We have been monitoring the situation closely, in particular the challenges facing the farming community. That is why I came forward with the tillage scheme, providing €400 per hectare for each additional hectare of cereal that is grown this year. It is also why I have come forward with the €1,000 payment to farmers to help with the cost of making silage. One of the key costs involved, alongside fertiliser, is contractor costs, which are obviously increased because of the current challenges. That should certainly help farmers and contractors with those bills, although it will not cover them all.

In regard to the removal of excise on green diesel, there is no more room to change that as we have now removed it all. The first 2 cent move reduced the take of the national Exchequer by 40%, which is small in regard to what it means for farmers but it was 40% of the total. We then proceeded to remove it all so there is now no excise duty on green diesel for the foreseeable future as a step to supporting the sector.

We are conscious of the pressures. We are working closely with the sector and will continue to monitor this issue.