People's Budget

The Budget 2008:

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Compiled by Dhaneshi Yatawara

Budget proposals, standing on the following four main concerns,

* Completing the major infrastructure development projects which are already commenced within the next two to three years

* Priority to extend relief to the low income groups to address their cost-of-living concerns

* Reawakening of local entrepreneurs

* Further strengthening the improvement of local products, were delivered to the Parliament on Wednesday 07th of November 2007, by the President of Sri Lanka Mahinda Rajapaksa.

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Proposals on fuel prices

* VAT on petrol to be reduced to 5% from the existing 15% from January 2008

* Remove the excise duty on Petrol - if the above measure will not be sufficient against the rapid fluctuations of crude oil prices in the world market. Kerosene prices will be maintained at the current existing levels.

Rs.100 kerosene subsidy per month to Samurdhi and other low income families who do not have electricity (Provisions already made) - A limited quantity of petrol to three wheelers with meters (Government proposes a loan scheme to enable to obtain such meters)

In order to recoup the revenue forgone, the President proposes to change the taxes on liquor, motor vehicles and non essential imports

Change only the price of petrol in an appropriate manner

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Proposals of Rice subsidy or the plantation sector and neighbouring communities

* An allocation of 200 million rupees to promote rice and rice flour consumption among plantation sector and neighbouring Communities

* Setting up of Lak Sathosa and Co-op Society outlets ensuring the success of this programme

* Proposal for a State Trading Wholesale Establishment

* A company owned by the Government to streamline supplies in order to stabilize prices, to import essential commodities when required and to maintain a buffer stock

* For such, the Budget proposes to avail of a bank guarantee to a value of US$ 10 million to facilitate related imports

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Proposals for concession for the fishery sector

* Provide financial assistance to facilitate a system through which Fisheries Corporation purchases 19 identified varieties of fish at guaranteed prices in the context of continuous rising fuel prices

* The VAT exemption granted to prawn farmers to improve the industry, is proposed to be implemented with retrospective effect from 2004

* Allocation of an additional Rs. 100 million to complete housing construction activities undertaken under the 'Diyawara Gammmana' Program and also to expand this program islandwide

* To give priority to provide vessels for deep sea fishing through the program undertaken by the Fisheries Ministry

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Fertilizer subsidy

* Avail all varieties of fertilizer at Rs. 350 per bag for paddy cultivation, and to avail Urea fertilizer at a concessionary price of Rs. 1,200 per bag for and owners owning less than 5 acres and Rs. 15,000 million is allocated to continue with this subsidy

* Encourage the use of organic fertilizer and Rs. 500 million has been allocated to promote organic fertilizer production

* Popularize in a structured manner, the use of appropriate carbonic/chemical mixed fertilizer over the long term, in place of chemical fertilizer which is now being used

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Proposals for the Environment Conservation Levy

President Mahinda Rajapaksa emphasized in his speech, "The damage caused to the environment through air and water pollution and soil erosion is estimated to be in excess of two percent of the GDP.

But the resources that we earmark for environment conservation is grossly inadequate. I, therefore propose to introduce an Environment Conservation Levy Act ensuring environment conservation. Individuals, businesses or items considered as harmful to the environment will be subject to this levy."

He further stated, "It is estimated to raise Rs.1,000 million from this Environment Conservation Levy that will be introduced from 2008. I also propose to allocate Rs. 150 million for Piyakaru Purawara and Haritha Gammana Environmental Programs.

It is proposed to reduce around 3 million tones of Carbon emission per year in Sri Lanka.

The associated foreign exchange earnings in line with the relevant international conventions are estimated to be around Rs. 3,000 million. I propose to set up a Sri Lanka Carbon Fund with the participation of banks and private investors as shareholders to facilitate this process."

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Proposals on strengthening the cooperative system

As the Cooperative system has contributed a unique service to the society and especially gave a protection to the lower income groups,

A grant up to a maximum of Rs. one million to all the over 300 cooperative societies to modernize outlets to be able to distribute essential commodities to consumers.

* To write off all long-term loans, interests due and all unpaid taxes of Co-op societies

* Proposes that Cooperative Societies and associated rural banks will become tax free enterprises in order to promote the distribution of essential items at affordable prices.

* It is also proposed that all cooperative societies scattered islandwide will be linked with Lak Sathosa outlets.

* The number of Lak Sathosa outlets to be expanded up to 200 with immediate effect

* An allocation of Rs. 650 million is proposed to set up more Budget shops in populated areas

* Proposals for the supply of essential commodities at concessionary prices for low income groups

* Confine tax concessions only to Lak Sathosa outlets, Cooperative Societies and Budget Shops

* Distribution of a welfare pack containing essential commodities as tax free prices to low income groups through these outlets

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Local milk production

* Increase the guaranteed price being paid to milk producers of milk to Rs. 30 - 40 range per litre

* Credit facilities will be provided at concessionary rates for the importation of milking cows, development of animal husbandry and to set up small and medium milk processing centres

* Exempt milk and dairy products from VAT

- Grant concessionary loans to develop over 50,000 livestock farms in Northern, North Central, Southern and Uva Provinces

* Strengthen the legal framework to prevent the slaughter of milking cows and to increase the associated fine from Rs. 250 to Rs. 50,000.

* Allocate Rs. 100 million to set up cold storage facilities and milk collection centres at provincial level

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Welfare for the apparel sector employees

* Allocate funds from the income of the Board of Investment to provide greater welfare facilities to employees in export processing zones through the provision of better bus services, mobile police services, medical facilities and by restoring street lighting and maintenance of roads in the Katunayake, Seeduwa and Biyagama local authority areas

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Incentives for public servants

* All public servants will get a cost of living allowance of Rs. 2,500 from January 2008 and to Rs.2,875 from July 2008 in addition to their monthly salary.

* Increase the Cost-of-Living allowance to pensioners.

* Allocate the required funds from the Treasury Miscellaneous Vote

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Proposal to develop the domestic textile industry

* Exempt importation of yarn from VAT in order to encourage production of high quality fabrics

* A cess of Rs. 50 per kilogram to be imposed on textile imports for domestic consumption

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National priority to address nutritional needs

* Implement an integrated program under the Ministry of Healthcare and Nutrition using the allocations made to several ministries totalling to Rs. 2,865 million to promote nutritional standard of pregnant and lactating mothers as well as infants with the emphasis on those in the eastern, estate areas as well as other difficult areas In addition to Rs. 1,650 million earmarked for school mid-day meal in 2008.

* In addition to the free nutritional food presently provided to pregnant and lactating mothers, a further sum of Rs. 250 million has been allocated to extend facilities required to promote breast feeding and to provide infant milk powder at concessionary prices through child and maternity clinics

* Increase the Social Responsibility Levy which is 1 percent to 1.5 per cent in support of further strengthening the National Action Plan for children expect to raise an additional Rs. 1,000 million from this measure

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Api Wawamu-Rata Nagamu (Green Revolution)

"Our country spends around Rs. 30 billion for the importation of milk powder, sugar, vegetables, fruits and wheat flour.

As incentive to promote local production of these on a priority basis, I propose to ensure high prices for such local products, by providing safeguards from imports, availing seed and plant material and extending technical support." - President Mahinda Rajapaksa stated in his Budget speech.

* Restrict the income tax on interest of the Agricultural Credit Guarantee Fund of Central Bank of Sri Lanka to 10 per cent, to further promote and expand facilities extended under that scheme

* Implement an incentive scheme for agricultural extension and research officers who are working in the field

* Allocate a further Rs. 300 million to strengthen the Api Wawamu - Rata Nagamu' Program

* Remove VAT on local sugar and rice based products

* Strengthen the legal framework to prevent coconut lands in excess of 5 acres from being blocked out and sold

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Api Wenuwen Api fund

* Set up a fund by the name of 'Api Venuven Api' to ensure the success of this program.

* All contributions to this fund as well as any income of the fund will be tax free.

* - Allocate Rs. 750 million to develop necessary infrastructure for these housing complexes.

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Drug prevention programme

* The revision of Excise and Cigarettes tax after the presentation of the Appropriation Bill is expected to increase a bottle of liquor by Rs. 35.00 and a cigarette by Rs.2.00

* This is expected to generate additional revenue of Rs. 7,700 million.

* Increase the stamp duty on the renewal of liquor licence from Rs. 1,000 to Rs. 10,000

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Neganahira Udanaya - Eastern development

* As a measure to encourage private investments in the Eastern region,

* A grant of a five year tax holiday for any investment over Rs. 50 million and generates employment for over 50 people

* Interest income on loans granted for such investments by the banks be exempted from income tax and equipment and machinery imported for such projects will be exempted from Custom Duties and VAT

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Proposals for the gem and jewellery sector

* Export income arising from imported and thereafter cut and polished to be exempted from income tax

* 50% of foreign exchange earnings of such exporters maintained in bank accounts in Sri Lanka, to be permitted to be used for the importation of required raw material

* The Central Bank of Sri Lanka to introduce a credit guarantee scheme to encourage banking institution to extend credit to those 14 industrialists engaged in the Gem industry

* To popularize gem auctions, only 2.5% income tax will be charged from the value realized from gem auctions conducted under the supervision of the State Gem Corporation, in place of prevailing income tax

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Proposals to develop domestic shipping industry

* In order to expand the international market for our products by increasing the number of ships owned by local ship merchants,

* Purchase of a ship to be registered under the Sri Lankan flag to be exempted from the Port and Airport Development Levy

* Ships being registered under the Sri Lanka flag will not be considered as an import

* When such ships carry cargo, the freight charges to be used for the purpose of computing Customs Duty to be limited to a 15% of the value of cargo being carried

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To promote Sri Lankan exports

Ports Authority charges for garments and other exports to be made similar to the levies and charges structure prevailing in relation to agricultural products

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Development of small and medium scale industries

* Extend the tax free period that was availed to those importing high tech machinery and equipment to enhance the production capacity of local enterprises, till December 2009

* Grant concessionary loans subject to a maximum of Rs. 15 million, at an interest rate of 10% for garment factories situated outside the Colombo district

* Extend financial assistance at concessionary rates from the National Co-operative Fund pertaining to project proposals submitted by Co-operative Societies for production purposes in dairy, fishery, livestock, textile and small and medium industries

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Local film and teledrama industry

Set up a National Heritage Center using such funds with the involvement of Tourism and Cultural Ministries with modern Training Centres and Studios to promote talents of local film and tele-drama artists

* Extend tax concessions on the importation of essential equipment required for the production of films and tele-dramas

* Increase tax relief granted on investments for production of films from Rs. 25 million to Rs. 35 million

- Grant tax concessions up to Rs. 25 million for the construction of high-tech modern theatres

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Intellectual Property Sales Development Centre

* Allocate Rs. 50 million to Intellectual Property Fund to set up an Intellectual Property Sales Development Center, to enable local intellectuals, artists and inventors to Introduce their creations engage in sales promotions as well as to hold discussions and seminars

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Year Five Scholarships

* To increase the number of year 5 scholarships from 10,000 to 15,000 to facilitate education of children of low income groups

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Proposal on graduate employment

* Including the 2,088 graduates who were recruited under the 'Tharuna Aruna' program, steps have already been taken to recruit 15,000 graduates in 2008 by following a recruitment procedure and through exams

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Development of lagging regions

* Extend the date to complete investment to qualify for a tax holiday for investments in districts other than Colombo and Gampaha till March 2009

* Treat expenditure incurred in the relocation of businesses outside Colombo and Gampaha Districts as an unlimited qualifying payment for two years

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Project Management Department

Set up a new department in the Ministry of Finance and Planning consisting of multidisciplinary experts in the field of law, business, finance, engineering and project planning and to undertake overall coordination and supervision of all project management staff.

Allocation of Rs. 50 million for the setting up of this Department.

Coordination between Provincial Councils and Line Ministries

* Implement a review mechanism targeting education, health, roads, agricultural and irrigation sector activities, with the corporation of relevant ministries and provincial agencies

* Work out with the provincial set up to introduce a road user fee on vehicles to maintain the provincial road network