Invisible sugar mafia haunts market - Deputy Trade Minister

• We intend to maximise the use of Lanka Sathosa and Cooperative  Establishments. We plan for the increase of Sathosa retail outlets from  454 to 1,000 in three years’ time
• When we release our sugar stocks at reasonable rates, some  errant traders release hoarded stocks from their stockpiles at  competitive rates
• We manufacture only 11 per cent  of the local requirement. Sugar imports have been taxed since before we  came to power
• In 2024,  around 55,000 tonnes of sugar had been manufactured at the factories in  Pelwatte and Sevanagala. Only 25,000-26,000 tonnes had been sold out   

R. M. Jayawardhana, Deputy Minister of Trade, Commerce and  Food Security, takes questions from Daily Mirror on the current crisis  in brown sugar manufacturing and the high prices of essential items.  Excerpts:   

QThe cost of living went through the roof during the  economic crisis. Prices of essential items are still high. What are the  plans by the government to bring them down?
By the time we got into power, prices remained high.  Political instability had resulted in economic instability. With the  election of President Anura Kumara Dissanayake to office, political  stability came in. The stable government, which was formed after the  general election, acts now with a consistent set of policies. The world  responds to it positively, eventually resulting in economic stability.  We improved all economic indicators. For example, our export sector  growth is high compared to last year. Previously, successive governments  failed to achieve revenue targets fully. However, we have acted  otherwise. We have targeted revenue on several counts-excise, customs,  earnings from tourism, and remittances from expatriate workers, etc. We  have realised the targets of revenue from these sources fully during the  first half of this year. Next, we saw our rupee value getting  depreciated against the U.S. dollar. Now it is stable.   
QIf I interrupt you, I can say that macroeconomic  fundamentals were taking shape before the new government came into  being. I am asking about your government’s steps to reduce prices of  essential items such as rice, milk powder, sugar, etc. What have you done  in this case?
We did a comprehensive study on rice farming. Farmers were  abandoning paddy cultivation because of the high production cost. We  realised that it would take a long time to reduce the production cost.  We sensed that it would be a major food crisis if rice farming were  abandoned by farmers. We ensured a reasonable support price for paddy.  Otherwise, we have to flood the market with rice imports to make retail  prices competitive. Then, it will have a bearing on local rice growers.  That is why we introduced a minimum support price for farmers to retain  them in the field.   
Sugar is a different story. We manufacture only 11 per cent  of the local requirement. Sugar imports have been taxed since before we  came to power.The price of brown sugar remained at Rs.340-360 a kilo  at that time. Now, it has been brought down to Rs.240-260 a kilo.   
We have been unable to reduce the prices of coconut oil and  coconut yet. The reason is insufficient production in the country. We  produce coconuts. At the same time, the coconut-related industry has  developed. Various coconut–related products are manufactured using nuts  otherwise available for household consumption. We are planning for  coconut cultivation in 38,000 acres to boost production.   
We maintain currency stability to lower the prices of  imported items. Prices of essential items, bar a few, have come down  under our government.   
QYours is a government that relies more on local production. But the local sugar production is now in a crisis. Isn’t it ironic?
There is a long story. Only 20 per cent of consumers use  brown sugar. We manufacture only 11 per cent of the total sugar  requirement. Therefore, a selling crisis is unlikely to happen. In 2024,  around 55,000 tonnes of sugar had been manufactured at the factories in  Pelwatte and Sevanagala. Only 25,000-26,000 tonnes had been sold out,  though. The ethanol production at these two factories had also not been  sold out fully. Then, the crisis remained by the time we took over. The  two factories were run at an operational loss. In the years preceding  2024, there were profits recorded. Yet, profits had been calculated  regardless of payments in arrears.   
We are in the process of studying as to why we are unable  to sell off the remaining stocks. We have stopped sugar imports. Brown  sugar is not imported through licensed importers now. Still, we suspect  there are some stocks hoarded elsewhere. These stocks are getting  released to the market in quantities by errant traders. We believe whether  there was a stock of brown sugar imported along with white sugar and  hoarded elsewhere, or white sugar is being made brown through a chemical  process. It is challenging for us to find those responsible. Yet, we  have already deployed a team to find it out. We have informed the Sugar  Research Institute, Customs and the Consumer Affairs Authority (CAA) in  this regard.   
QIs this the reason for you not being able to sell off the stocks with the two sugar factories?
Previously, only private businessmen had been involved as  agents selling the sugar stocks that turned out at these factories. However,  we did not give in to their demands. We were not prepared to work  according to their whims. Instead, we tried to appoint our  representatives at provincial levels to sell sugar. They purchased sugar  from us at Rs. 230 a kilo and sold at Rs.235-236 a kilo to wholesalers.  There is a well-orchestrated plan to sabotage our activities. Recently,  even a piece of rock was found concealed inside a stock of sugarcane  meant for processing. It is a planned act of sabotage.   
When we release our sugar stocks at reasonable rates, some  errant traders release hoarded stocks from their stockpiles at  competitive rates. It has triggered a crisis for our agents as a result.  Errant traders compete with us in trading. We also lowered prices in  competition with them. We cannot run businesses like this. Starting from  next week, we will release stocks directly from our storage according  to a different plan.   
QThe whole crisis has been triggered by the state  involvement in trading in a world where market forces prevail. What is  your view?
Brown sugar production is done only in Pelwatte,  Sevanagala, Gal Oya and Ethimale factories. When there is a restriction on  imports, there cannot be another source of brown sugar other than these  four factories.   
We take up the challenge posed by some businessmen, along  with others. Otherwise, we did not have any intention to run businesses.  There is a challenge before us. We accept it. We plan for wholesale  trading.   
QIs it economically viable to devote such a large extent  of land for local sugar cane cultivation for the fulfilment of mere 11  per cent of the total requirement?
Your argument is correct if you apply it only to sugar  manufacturing. We have to think of Ethanol production for liquor  manufacturing. We get revenue from excise. There are many other  by-products. We manufacture fertiliser and generate electricity using  waste. In the overall context, this argument is not valid. Otherwise,  allocation of 14,000 hectares for sugar only is not economically viable.    
Otherwise, there are 7,000 employees in the industry.  Besides, the presence of Sevanagala sugar factory is a reason for the  development of Embilipitiya town. A lot of people have also secured  indirect employment opportunities from this factory.   
QThe government has imposed restrictions on certain  essential items such as cowpea. It was done at one point in the past to  boost local production. What is the policy of the new government?
When we took power, green gram was sold at Rs.800 a kilo  and cowpea at Rs.1200-1300 a kilo. Yet, because of steps taken by us,  the green gram price dropped below Rs.800 a kilo in the retail market.  We found that farmers, after their rice crop, cultivate green gram and  cowpea in their fields as supplementary crops. Once we lifted import  restrictions, these farmers’ crops could not fetch a good price.  Wholesale traders started purchasing these crops at Rs.300 -350 a kilo.  It affected local production. If we impose import restrictions again, it  will be for the benefit of these people. Otherwise, we don’t want to  leave consumers in the lurch. We want to protect both farmers and  consumers alike. We want to stabilise prices.   
QWe, Sri Lankans, pay indirect taxes more than direct  taxes. The ratio is very high. Indirect taxes mean taxes on essential  items being consumed by ordinary people. What is the plan by the  government to cushion the burden on people in this case?
We are planning to increase our revenue from direct taxes  in main. In the past, it remained only 20 per cent of the total. It is  better if we can reduce the indirect tax component to 40-60 per cent.  Then, that cannot be done overnight. We want to broaden the direct tax  base. Then we believe our indirect tax component can be reduced to 50  per cent. We plan to achieve this in the span of five years.   
QWhat is the role your government envisages for the state sector to control prices?
We don’t believe that the government should be heavily  involved in trading activities. Still, we believe in the government’s  involvement in controlling market forces to a certain extent. For that,  we intend to maximise the use of Lanka Sathosa and Cooperative  Establishments. We plan for the increase of Sathosa retail outlets from  454 to 1,000 in three years’ time. If we can make 20 per cent  intervention in the market, we can make an impact. We intend to  strengthen the Cooperative Movement with a focus on the development of  the agriculture sector. We aim to export agro-products more and more. We  will build 1,000 manufacturing cooperatives. We will use the same  movement for distribution as well.   
We are also planning to upgrade the Economic Centres with  the infusion of new technology, both for wholesale purchasing and retail  trading. That is to build a direct nexus between farmers and consumers.     
Sathosa warehouses will be used for import storage.