The Hon. Sajith Premadasa - Leader of the Opposition

¶ 01 Hon. Speaker, I raise under Standing Order 27(2) a matter that particularly affects around 250,000 people in the historical Uva-Wellassa region.

¶ 02 Sri Lanka’s sugar industry is a domestically developed commercial industry of long standing. A large number of families depend on this industry for their livelihood; by our reckoning, over 250,000 people. It is reported that due to disparities in current tax policies, the industry faces severe challenges in marketing locally produced sugar.

¶ 03 Therefore, I raise several questions to the Government regarding the current situation of domestic sugar production, imports, tax policies and Government action.

¶ 04 1. How many sugar factories are currently operating in Sri Lanka under the Lanka Sugar Company? What is the annual quantity of sugar produced by each factory? What percentage of the country’s annual sugar requirement does that total production represent?

¶ 05 2. What is the current annual quantity of imported sugar? What taxes are imposed on a kilogram of imported sugar and in what amounts?

¶ 06 3. What is the amount of tax imposed per kilogram on domestically produced sugar? What are the reasons for exempting imported sugar from VAT and imposing VAT on locally produced sugar?

¶ 07 We have been informed that about Rs. 50 is charged per kilo on imported sugar. However, domestic production is subjected to 18% VAT. Therefore, the cost of producing a kilo of sugar is Rs. 238, but it is supplied to the market at Rs. 175, operating at a big loss. We ask the Hon. Minister why 18% VAT continues to be imposed on local production under such circumstances.

¶ 08 4. Does the Government accept that the sugar factories under Lanka Sugar Company are currently operating at a loss?

¶ 09 According to information we have received: Gal Oya has a loss of Rs. 17 billion, Ethimale Rs. 7 billion, and Pelwatte Rs. 10 billion. We also hear the Sevanagala factory needs complete refurbishment. What is the actual status? What data and information does the Government have about these losses?

¶ 10 Has the Government focused on turning these factories into profitable institutions? What is the practical action plan for that?

¶ 11 I emphasize this because there is a great responsibility regarding State-owned institutions. What steps is the Government taking to make them profitable?

¶ 12 5. What are the reasons for losses from sales of ethanol, a by-product of sugar production? What steps is the Government taking to minimize those losses?

¶ 13 As the subject Minister knows, the current market demand price for a litre of ethanol is reportedly Rs. 450–475. However, production costs are around Rs. 628–750 per litre, and at minimum we would need to sell at around Rs. 800 per litre. Last year we received around Rs. 1,500. I am not advocating ethanol promotion per se, but ethanol sales are crucial within the overall production cycle because the lives of 250,000 of our citizens in Uva-Wellassa depend on it.

¶ 14 6. Does the Government accept that removing VAT imposed on locally produced sugar and ethanol could minimize the losses faced by the Lanka Sugar Company factories? Will the Government remove the VAT on locally produced sugar and ethanol in the future? If not, why?

¶ 15 Additionally, 30% of profits are taken as tax on sugar; likewise, 45% of profits are taken as tax; furthermore, Rs. 10,000 is charged as tax per metric ton of molasses. Ultimately, this tax burden presses the farming community engaged in the sugar industry and ordinary people. Recently there was agitation that the cane procurement price per metric ton would be reduced by Rs. 10,000. With these issues, I raise these questions to the Hon. Minister. As I understand, your appointed Chief Operating Officer, Nuwan Dharmaratne, has clarified the challenges faced by the industry. Especially on behalf of the more than 250,000 heroic farmers in Uva-Wellassa, I request the Government to identify these challenges and provide rapid solutions.