Confectionary industry under stress due to tax increase on imported palm oil

• Special commodity levy of Rs.100 per kilo slapped on imported palm oil
• Confectionary industry set to lose Rs.100mn per month with tax increase 
• Says no substitution locally available as coconut oil cannot be used in production process
• Warns manufacturers unable to maintain current prices if new tax not removed

The recent increase of import taxes on palm oil, the  essential fat required by confectioners and bakers in Sri-Lanka, is set to cause significant stress and impose additional burdens to both the manufactures and the consumers of these products. 

The tax on palm oil, by way of a special commodity levy, was increased by Rs.100 per kilo. With the tax increase, the confectionery industry is estimated to lose approximately Rs.100 million per month.

 
According to Lanka Confectionery Manufacturers Association (LCMA) Chairman S.M.D. Suriyakumara, such a loss will have a very negative impact on the operations of all confectionery manufacturers in the country, specially in the currant economic environment.

He went on to add that coconut oil cannot be used as an alternative in their production process, hence manufacturers will be compelled to import palm oil at the increased prices. 

The Sri Lankan confectionery industry is unique in the sense that despite the constant threat of foreign competition, the industry was able to retain 100 percent Sri Lankan ownership and has provided Sri Lankan consumers with products that are even better than what is seen in foreign countries.  

The industry consists of companies producing biscuits, cookies, cakes, wafers, toffees, chocolates, desserts, snacks, ice cream, etc. Sri Lanka’s confectionary industry, which was built on over many decades of hard work, contributes over 85,000 metric tonnes per annum to the national food supply chain. 

The industry’s contribution to annual taxes is also significant and these confectionery companies have been exporting to over 40 countries with an annual export income of US$ 100 million.

The industry employs over 50,000 people directly and over 500,000 people indirectly through the national supply chain network involving over 150,000 retailers across the country. LCMA has requested the government to look into this tax increase on palm oil, and hopes the government will be mindful of the impact on the end consumer during this time of economic downturn. 

The Association believes that if this special commodity levy is not removed it will be very difficult for manufactures to maintain current prices.