Food and Drink Industry Ireland (FDII) yesterday called on government to take a range of measures to help the industry deal with rapidly rising energy cost.
Paul Kelly, FDII's director said energy prices for the sector has risen by up to 50 per cent over the last 18 months. The cost of the increase to food and drink businesses is equivalent to between five and ten per cent of operating profits, he said, warning that downward pressure on the industry's margins could put jobs at risk.
Food and drink manufacturing is an energy intensive process, due to the heat required for processing, cooking and drying. Energy ranks alongside labour and raw materials as the biggest input costs for the industry. Input prices are adding on to the pressure being put on profit margins by food retailers, who compete in a stagnant market through cut rate pricing.
"Escalating energy costs are putting an already pressurised sector under intolerable strain," Kelly stated in a press release. "We still have not seen the long promised government energy strategy and politicians seem to have no idea how to get us out of this mess."
He criticised the government for selling off the state-owned energy sector to the private sector at a time when users are being hit by spiralling price hikes.
"Today's users should not be paying for benefits to be derived by future generations," he said. "The cost burden should be spread out over a longer period."
The FDII called for government to immediately publish a national energy policy, and introduce "real competition" in Ireland's energy sector. The FDII says the government's current model of market liberalisation had only led to limited competition among energy providers.
The FDII also called for increased capital grant aid and tax relief for investments in alternative and renewable energy sources such as biodiesel.Current measures on bio fuel excise relief are not ambitious enough, he said.
Government should reduce excise duty on fuel as a means of redistributing what he said were the "windfall" profits that have accrued to the state from higher fuel prices.
'The energy regulator has singularly failed to stimulate competition in the energy market. Irish food and drink businesses struggle everyday to reduce costs, boost productivity and compete in international markets," he said. "There is no justification in the regulator granting the main energy suppliers the exorbitant increases they are looking for, until they deliver a more efficient and cost-effective services to their customers. The Commission for Energy Regulation (CER) must seek value for money in all areas within its control."
He noted that the food and drink industry is Ireland's largest indigenous exporting sector, with gross output valued at €17bn, accounting for about 20 per cent of the country's manufacturing output, nine per cent of gross domestic product and and 25 per cent of net foreign earnings.