Farmers cry foul

Experts say aspirations not reflected in Budget 2016:

by Rohana Jayalal

According to the 2016 Budget, the most adversely affected sector is agriculture and the Budget proposals do not address the aspirations of the farmers.

Chairman, Agro Lanka PLC, Danushka Priyankara said if farmers refrained from using fertiliser it would have an adverse effect on the harvest. The problems in the agricultural sector must be taken into account since it affects the entire society in the long run. Therefore, it is the duty of the government to pay attention to the farmers’ pleas.

The fertiliser subsidy was converted into a Rs. 25,000 allowance in Budget 2016. This decision was criticised by many farmers. However, the government says the contribution by the agricultural sector to the economy has declined drastically during the past few years.

According to statistics, the contribution of agriculture in the economy was only 10 percent by 2014. It was stressed that since the harvest from one hectare was low, Sri Lanka was unable to compete in the international market.

The excessive use of chemical fertiliser was largely responsible for the increasing number of kidney patients in areas where paddy is cultivated.

It is said that a majority of environmental issues such as water pollution was also due to the excessive use of fertiliser.

During the former regime, the government initiated the fertiliser subsidy scheme under the Mahinda Chinthana program. The government allocated Rs. 30,000 million for the subsidy. However, due to an additional charge of Rs. 150 for insurance, the farmers were compelled to pay Rs. 500 for fertiliser.

This scheme drew criticism as there were allegations regarding quality.

Presenting the 2016 Budget, Finance Minister Ravi Karunanayake said there was no direct connection between the fertiliser subsidy and paddy production. He said that even with subsidies the farmers were still being exploited.

Therefore, the government proposed an allowance of Rs. 25,000 for farmers who cultivate paddy lands below one hectare, during the two seasons. In 2015, the subsidy was increased to Rs. 37,000 million.

Only Rs. 12,500 will be given per season and the allocation for one acre is Rs. 5,000, while a bag of urea costs Rs. 2,466 in the market. Two bushels of paddy could be produced from one acre of land. Farmers allege that the government is trying to generate extra revenue for the State by taxing fertiliser.

Farmers claim that their problems could not be solved by providing this allowance.

Economic Analyst and former lecturer Prasad Senanayaka said this is a good Budget for stock dealers, SMEs and foreign investors. Income tax rates would be amended to suit the investor-friendly economy. SMEs would be encouraged to list and there would no more strict rules for foreigners investing in the stock market.

The government should help develop skills in the SME sector and find international markets for SME products which is critical for the development of the sector, he said.

Past President, Ceylon National Chamber Industries, A.K. Ratnarajah said this was the first time so many revisions had been made to the Budget which has failed to address vital issues such as repayment of outstanding loans, excess borrowing and drop in foreign reserves. The Budget favours the affluent class.

“The driving force of the economy are SMEs. Approximately 75% of the enterprises in the country can be classified as SMEs and they account for approximately 45% of the employment opportunities. Many SMEs do not use latest technology and have limited access to finance,” Senanayaka said.

“The SME sector needs cheap transport to channel its goods. Increasing taxes on vans and mini lorries does not help,” he said .

Managing Director, Suhada Property Development, Nimantha Karunarathna said international investors are focusing attention on Sri Lanka’s booming residential and commercial real estate sector. As a result of rapid urbanization, Colombo is no longer the sole attraction, with businesses exploring the possibility of setting up projects in cities such as Kandy, soon to become the country’s first smart city. The removal of land lease tax is expected to encourage more non-nationals to invest in the growth and development of smaller cities.The removal of land lease tax for foreigners is bound to increase the number of FDIs to Sri Lanka’s real estate sector.

While previous laws banned foreigners from owning property and real estate leased to non-nationals was subject to 100 percent tax.

The government has proposed the removal of this lease tax for non-nationals.As property prices in central Colombo are much higher than in the suburbs or second-tier cities, the reduction in construction costs is a step towards increasing the number of affordable properties within city limits. The Budget provides an opportunity for the middle-class to purchase real estate within Colombo. However, due to commercialization, many are migrating to second-tier cities.