Speaking to Daily News Business Ariya Kiri, Director CEO Lakshman Weerasuriya said although the Government says that they have withdrawn all the taxes but unfortunately the requested VAT has not been reduced. “This is not the tax revision we asked for.”
“When the Association requested a considerable VAT reduction in order to import milk powder to stop the current shortage, the Government has given a mere Rs. 15 VAT reduction for a kilo of milk powder and the association is not happy with the new tax concession offered.’’
“We have told the government that If they cannot remove the VAT we need a price increase of Rs. 250 from a kilo,” he said.
“The Association is asking the Government to reduce another Rs. 250 from VAT to enable our members to import milk powder again as earlier,” he said. He said however if the government withdraws the VAT they can manage with a Rs. 200 price increase.
“We made a number of requests to the Consumer Affairs Authority (CAA) from the beginning of this year to increase the price of a kilo of milk powder by Rs. 300. This is to meet the price increase in the world market, the high cost of freight charges, packaging and increasing the value of dollar against the Sri Lankan rupee. The global milk powder prices in the last six months rose from USD 2,900 to around USD 4,000. Accordingly importers lose Rs. 270 from a kilo according to the current Government controlled price and we face a severe loss of Rs. 1.5 billion monthly and we cannot shoulder these losses anymore.”
Meanwhile, another player in the market said that in addition to these global price increases, packaging starting from a corrugated box and local transport costs too have gone up.
“One must understand that the industry is operating on wafer thin margins and without sufficient price increase we are incurring huge losses and have to reduce imports. One of the other major issues is that local factories maintain tight health guidelines working on shift basis without mixing employees and restricting people’s movement. This has limited our production capacity to what it was before and this too has resulted in a dip in our supply.”
“Some Milk collection centers too are closed due to C-19 and this has a negative impact on the entire supply chain and once the situation improves supply will increase.”
He said that the agreement put forward that the industry made profits earlier and prices shouldn’t increase don’t hold water. According to reports Sri Lanka’s monthly milk powder consumption is between 6,500 to 7,000 metric tons and only 40% is sourced locally. Currently a 400 gram packet of full cream milk powder costs Rs.380 and a 1 Kg pack costs Rs.945.
On Tuesday the Cabinet of Ministers decided to allow Finance Minister Basil Rajapaksa to decide on reducing the taxes imposed on imported powdered milk to arrest the shortage currently prevailing in the market.
Accordingly, the Cabinet of Ministers decided to vest powers on the Finance Minister to study the matter in detail and take necessary action to ensure that sufficient stocks of milk powder are supplied to the local market by zeroing existing tax rates or taking other measures to import powdered milk without increasing the local consumer prices.