The imposition of a 5 percent Ports and Airports Levy (PAL) on bunkering services, a move currently under review by the government, could have serious negative implications on operators, according to Ceylon Association of Ships’ Agents Chairman, Ralph Anandappa.
Speaking at a panel discussion on Tax in the Supply Chain, organized by the Chartered Management Institute in partnership with KPMG, Anandappa warned that the imposition of PAL would result in Sri Lankan operations losing competitiveness as operators would be forced to out-price themselves further.
“At present, bunkering costs in Sri Lanka are high at around US$ 75-100 per tonne. However if the levy is imposed then prices would go up to between US$ 110-150 per tonne, and this will lead to the withdrawal of much business meaning negative implications for ships’ agents and service providers including the port of Colombo,” Anandappa said.
According to him, the bunkering business is estimated to currently generate Rs.800 million in turnover, Rs.750 million of which goes to the government.
“The Magam Ruhunupura Mahinda Rajapaksa port is also trying to establish bunkering operations, but I feel that if the government goes ahead with the imposition of PAL, this business will be wiped out and that will mean large losses of foreign currency for the government and it will totally take away any profit margins for operators,” he stressed.
The move from the government was drafted to be effective from the January 1, 2013. However, following lobbying from stakeholder organizations; the government has since suspended the levy and is currently reviewing the decision.