Sri Lankan vegetable oil exporters demand removal of import tax

Sept 27, 2007 (LBO) – Exporters of ‘vanaspathi’ vegetable oil to India have called on Sri Lanka to remove a 25 dollar per tonne levy on raw material imports, if the industry is to survive.

India has already imposed a quota for the product, to protect a domestic industry. Vanaspathi a type of hydrogenated vegetable stated to be made in Sri Lanka after an Indo-Lanka free trade deal.

Exporters are finding it difficult to ship to India under the Indo-Lanka free trade deal because of the import charge by the Sri Lankan government and protection given to Indian manufacturers, a spokesman for exporters said.

S. A. P. Suriyapperuma, director of Pyramid Lanka and a member of the Vanaspati Manufacturers Association of Sri Lanka, said local manufacturers are unable to make full use of their export quotas.

A statement from the association said vanaspathi exports to India from Sri Lanka resumed in December 2006 after both the governments agreed to limit shipments to a total annual quota of 250,000 tonnes.

Under the deal, the total quantity of vanaspathi ghee exports was limited to 200,000 tonnes a year and bakery shortening and margarine to 50,000 tonnes.

The quotas were allocated to 14 manufacturers.

Suriyapperuma said the Sri Lankan government had introduced a special levy of 25 dollar a tonne on import of the main raw material, crude palm oil.

Meanwhile India was slashing tariff barriers that existed earlier, making Sri Lankan products less competitive, the industry said.

The industry which blossomed after a free trade deal, with Indian firms setting up shop in Sri Lanka, came under fire from India which imposed import quota following protests from its domestic industry which said Sri Lankan exports were flooding the market.

Meanwhile delays in getting value added tax (VAT) refunds from the Sri Lankan government were also creating difficulties for vanaspathi exporters.

The local vanaspathi manufacturers had to pay VAT on all inputs including raw materials and packing materials and then claim a refund monthly from the Inland Revenue Department, the statement said.

But refunds are made after six to twelve months from the date of claim.

However, some relief was given with the Export Development Board having introduced a procedure to defer payment of VAT on all inputs used by export oriented manufacturers.

“The vanaspathi industry is going down hill and it will get slowly killed unless the government takes stock of the situation and remove the 25 dollar import levy,” Suriyapperuma said.