Sunday October 21, 2018

Sri Lanka wheat milling duopoly 75-percent controlled by Prima

Oct 01, 2017 11:31 AM GMT+0530 | 0 Comment(s)

ECONOMYNEXT - Sri Lanka's state protected wheat milling duopoly produces 99 percent of the annual usage of 750,000 metric tonnes of flour in the country, with a Singapore based firm controlling the biggest shares, data disclosed in parliament has revealed.

About 75 percent (562,000 metric tonnes) is produced by Prima mill owned by Singapore firm and 25 percent (about 187,000 metric tonnes) is produced by Serendib Flour Mills, Deputy Trade Minister Sujeewa Senasinge told parliament.

The current administration has cut import cess on wheat flour to 15 rupees from 25 rupees a kilo amid a drought which hit rice production, he said.

Senasinghe said a wheat flour was about 145 to 150 rupees a kilo. The average value in 2014 was 97 rupees, in 2015 87 rupees and in 2016, 89 rupees.

The current administration also cut tax on wheat grain to 6 rupees from 9 rupees.

The two flour mills are able to sell wheat flour at high prices, earning fat margins, even when global prices fall with the help of differential taxes.

The current administration has reduced the tax gap between wheat flour and raw wheat to 19 rupees to 8 rupees.

The tax gap allows the mills to beat competition from direct flour importers and earn excessive profits (rents) by selling overpriced wheat to customers.

Prima had a monopoly in milling until the mid-1990s through the tax differential until Serendib Mills was set up.

Wheat is believed to have been originated around president day Turkey and Iraq about 8,800 BC, and reached India about 6,500 BC. It is believed to reached Europe about 2,500 years later and Britian about 3,500 years later.

Wheat is an important part of the diet of India and Pakistan. Wheat has a high yield (about 10 tonnes per hectare) and has become the world's most important grain in reducing hunger of poor people, but unlike rice, wheat requires less water.

In Sri Lanka also the poorest people in the hill country and the north east consumer higher levels of wheat despite high taxes. Sri Lanka has high import taxes partly due to a merciless autarky, critics have said.

China and India are the world's top producers of wheat, followed by the US and Russia. Russian wheat output soared after the collapse of communism. (Colombo/Oct01/2017)


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