Battered by a myriad of higher import duties and cess taxes for years, the Sri Lankan confectionery manufacturers now find challenging to compete in the local market due to the double standards by the state and the anti-competitive measures followed by some unscrupulous traders, according to a seasoned industrialist in the trade.
According to Ceylon Biscuits Limited Deputy Chairman Ramya Wickramasingha, the double standards on local manufacturers and the importers in applying regulatory oversight, taxation policy and marketing have caused more harm to the local industry making them uncompetitive on the face of imported confectioneries.
“We have to import almost 100 percent of our ingredients and we have to pay a hefty duty. Our energy costs are much higher, hence we cannot compete. Therefore the local manufacturers will have to close down,” said Wickramasingha.
Speaking at the apex body for the trade, Lanka Confectionery Manufacturers Association’s (LCMA) 23rd Annual General Meeting, Wickramasingha said the imported confectioneries have a distinctive cost advantage over their local counterparts as the former could manufacture most of their ingredients without paying any duty.
“If you look at our neighbouring countries, they manufacture most of their ingredients. So, they don’t have to pay any duty,” he added.
In Sri Lanka, the duties charged for certain ingredients are 100 percent. Specially, the fat, which accounts for 40 percent of the manufacturing cost of a confectioner, is charged with a duty of Rs.110 a kilo. Apart from the duty, fat and specialty fat are further charged with cess of Rs.60 and Rs.70 a kilo at the point of import.
Specialty salt is charged with an import duty of Rs.40 a kilo. However after continuous calls, the import cess charged on certain ingredients such as whey powder and specialty fat was reduced but the amount of import levies charged on whey powder remains higher than the Cost, Insurance and Freight (CIF) price.
Sri Lanka’s confectionery market is estimated at over Rs.4.3 billion and the import’s share is estimated to have a share of between 5 to 7 percent, but the trade believes the figure is largely underestimated.
Highlighting another clamp down on fair trade, Wickramasingha said the policy of the supermarkets to promote their supermarket owned brands over others’ have significantly restrained their ability to expand in the local market.
Sri Lanka’s main-stream super markets are mostly backward integrated and thus their produce gets higher shelf space over other manufactures.
Sometimes in a bid to discourage other manufacturers’ products, the supermarkets are seen demanding unreasonable margins and in worst case they go to the extent of damaging the packs and products of those manufactures.
“It is not allowed in other countries for the supermarkets to get in to manufacturing. This poor state of affairs is due to us not properly implementing the monopolistic law in this country,” he noted.
Meanwhile the LCMA outgoing Chairman, Sylvester Perera further highlighted double standards in packaging laws between the local manufacturers and importers.
According to Perera, the imported products are permitted to paste stickers to comply with the labeling regulations whereas the locally manufactured products are not allowed to do so.
The LCMA has already requested an import levy reduction on packing materials from the Finance Ministry. Further speaking on the re-surfaced talks on Comprehensive Economic Partnership Agreement (CEPA) with India and the currently stalled talks for an FTA with China, Wickramasingha requested authorities to take necessary precautions on safeguarding local manufacturers before going ahead with these agreements. “We have no objection of signing trade agreements with any country. But there should be a level playing fielding,” he remarked.