Sri Lanka sugar firm uses state credit to stop farmers switching to other crops

Sept 12, 2009 (LBO) – Sri Lanka’s Pelwatte Sugar Industries (PSISL) has used a state-supported credit scheme to stop farmers from moving into more attractive food crops and rubber cultivation and lobbied the government to increase tariff barriers. Chairman M J C Amarasuriya told shareholders the firm had been able to use a rural credit scheme provided by the Central Bank to persuade outgrowers “to resume sugar cane cultivation instead of growing other crops such as banana, maize and banana.”

The firm has also successfully lobbied the state to lift a value added tax (VAT) on its own products but raised the tariffs on cheaper imports consumed by a larger section of Sri Lankan citizens.

“Value added tax on sugar had been reduced from 5.0 percent to zero in September 2008, which was the major contributory factor for the increase in margins,” the company said.

Simultaneously an import duty on sugar which was already at 12 rupees was increased to 14 rupees.

“This relief package was a direct outcome of the strong lobbying by Mr. Ariyaseela Wickremanayake, on behalf of PSISL,” the firm told shareholders.

Wickremanayake is the managing director of the firm, and is the founder of Master Divers, which now owns a majority of the firm