Increased levy will push up prices, say importers

by Lalin Fernandopulle

Sugar and canned fish importers are concerned over the sudden increase in the import levy on sugar from Rs. 18 to Rs. 30 per kilogram this week, canned fish earlier, and the depreciation of the Sri Lankan rupee by 4% which will have an upward price revision.

Essential Food Commodities Importers and Traders Association sources said the move taken to protect local manufacturers who contribute around 10 percent of the national sugar requirement is unfair on the part of the consumer.

The country needs around 650,000 metric tons of sugar per annum of which local production is around 60,000 to 70,000 metric tons. Sri Lanka imports around 90 percent of the requirement from India, Brazil and Thailand which cultivate sugarcane on a large scale. In Sri Lanka sugar cane is cultivated in a small way at Sevanagala and Hingurana.

It is estimated that the demand for sugar may reach around one million metric tons by 2020. The current per capita sugar consumption is around 30 kgs per annum. The government has set a target of manufacturing at least 50 percent of the country’s needs within the next five years. The high production cost has been a disincentive to manufacture sugar in the country.

Manufacturers said that producing sugar involves high investment on factory and machinery maintenance and this why many prefer to import which is more lucrative.

Agricultural experts said around 100 kgs of sugarcane is needed to produce around 14 kgs of sugar.

Essential Commodities Importers Association sources said increasing the import levy in addition to the controlled price on sugar will result in an increase in the price of sugar from the current retail price of Rs. 87 per kilogram to around Rs. 95 a kg in the future.

The wholesale price of a kilogram will be around Rs.88-89 based on the current Indian price of sugar which is about US$ 400 per metric ton. A price ceiling of Rs. 87 was imposed on a kilogram of sugar in the interim Budget presented early this year. There is no maximum price on packeted sugar.

Importers Association sources said the Association had called upon the authorities to lift the price control on sugar and permit market conditions to prevail. The revised import duty added to the price control will trigger a shortfall and retail traders would be reluctant to purchase fearing Consumer Affairs Authority raids.

The depreciation of the rupee has increased the import cost of all commodities. Price controls do not work in an open economy, importers said. The annual expenditure on sugar imports is around US$ 200 million. Global commodity prices are expected to rise sharply due to adverse weather (El-Nino) across the world and the growing demand for food with the rise in population.

Industry experts said no country can completely do away with imports as all food items cannot be produced to meet the entire needs of the country. Sri Lanka should focus on improving tea and spice exports which have carved a niche in the global market. Sugarcane is primarily grown in the Moneragala district and production consists mainly of the less refined brown sugar.

Imports mainly consist of refined white sugar. Importers said the situation is the same with the price ceiling of Rs. 140 and an import duty of Rs. 50 on a kilogram of canned fish which have put importers in difficulty. They said steps should also be taken to put a halt to the practice of some unscrupulous traders importing high duty items concealed in containers of low duty commodities and declaring them as low duty items at the Customs.