The Hon. Sunil Handunnetti - Minister of Industry and Entrepreneurship Development

¶ 01 Hon. Presiding Member, please give me a moment to answer that question. I thank the Hon. Deputy Minister for raising it.

¶ 02 Hon. Presiding Member, the real issue is this: these factories cannot continue operations. The reason is that imported white sugar is not subject to VAT, whereas locally produced brown sugar is charged VAT at 18 percent, plus an additional 2.5 percent—about 20 percent in total—by the time we release brown sugar to the market. When brown sugar leaves the factory, a kilo costs around Rs. 300, while white sugar in the market is Rs. 220 per kilo. There is a public perception that white sugar is good and brown sugar is bad, but the truth is otherwise. Therefore, Hon. Deputy Minister, I intend to submit a Cabinet paper next week requesting the removal of VAT on brown sugar. If VAT is removed from brown sugar, we can compete on equal terms and there will be no price differential. Then we can sell brown sugar at a fair price.

¶ 03 Hon. Presiding Member, Sri Lanka’s sugar requirement is 130,000 metric tons. The three sugar companies here can produce about 70,000 metric tons. The balance must be imported. Another problem is that brown sugar has been classified as a non-essential item, while imported white sugar has been classified as an essential item. Locally produced sugar is treated as non-essential, whereas imported sugar is treated as essential, with special concessions given to those who engaged in sugar tax fraud. That is what has happened. This must be corrected. Until it is corrected, this issue will not be resolved. Hon. Deputy Minister, I request your intervention. We will resolve the employees’ issues very soon. Before that, we must clear the existing stocks. Our stocks are now high. To release them to the market, we must obtain Cabinet approval for the VAT relief. We intend to do so.