The Hon. (Dr.) Harsha de Silva

¶ 01 Hon. Deputy Speaker, we could not listen to the earlier discussion on MLB. Hon. Deputy Minister, as I heard, there seems to be a confusion. You spoke about Governance-Linked Bonds, but what is at issue are Macro-Linked Bonds. Under Macro-Linked Bonds, a relief applies if our GDP exceeds USD 108 billion. Please get this clarified because your interpretation is not correct.

¶ 02 What you did not speak about is the mess created by removing SVAT. You claim there is no unfairness to those selling domestically. But you yourself went to the Supreme Court challenging the Economic Transformation Bill saying priority must be given to domestic import-substitution industries, not exports. That was your case. What we need is to strengthen exports. Yes, we can support domestic activity, but we must push domestic producers towards exports. This is where the problem arises.

¶ 03 Under SVAT, zero-rating applied for exporters and deemed exporters. If an exporter purchased inputs, VAT was zero-rated. You removed SVAT. Now, a BOI exporter importing fabrics has zero VAT on imports. But if the exporter buys domestically, due to your VAT at 18 per cent, the local supplier’s invoice is 18 per cent higher. Two identical estimates for the same product, same quality, same delivery date, to the same buyer: the imported route shows Rs. 100,000, the domestic supplier shows Rs. 118,000. Who is discouraged? The domestic producer. You claimed to strengthen local industry, but blindly following the IMF is not the way. Go to the IMF with a vision to take local producers to international markets. That requires support, not removing it.

¶ 04 You should have retained SVAT for exporters and removed the abusive parts that were misused in the past, not scrap the whole system. If you remove Cess to reduce input costs, fine. But when you impose VAT, exporters must be fully relieved; otherwise, they are disadvantaged in cash flow and pricing. The current approach traps domestic producers in the local market instead of enabling them to integrate into global value chains.

¶ 05 On energy costs: competitiveness depends heavily on electricity costs. Due to changes in the generation mix — stated in diplomatic language as “production composition change” — shifting from coal to fuel increases costs if driven by factors like poor-quality coal. You must reduce electricity tariffs quickly.

¶ 06 We oppose this measure. Withdraw it and amend it to genuinely strengthen domestic production while reducing electricity bills as fast as possible.

¶ 07 Thank you.