Sri Lanka cuts import tax on rice amid crop shortfall

ECONOMYNEXT – Sri Lanka has cut an import tax that has kept domestic rice prices high pushing up food costs of the poor, and restricted supply allowing large millers to control the market and earn excess profits.

A so-called special commodity levy on imported rice has been brought down to 05 rupees a kilo for raw, nadu and samba from January 27, from 15 rupees a kilo, the finance ministry said.

The 15 rupees tax had been effective from January 17.

Sri Lanka taxed all types of imported rice at 30 percent or 50 rupees a kilo up to 2016, keeping rice prices above other countries in Asia.

Internationally traded rice is around 50 rupees (330 US dollars) to 57 rupees (380 dollars) a tonne, not counting freight and other port charges by December 2016. Pakistan super kernel white Basmati is about 130 (874 dollars) according to FAO data.

In Sri Lanka a powerful farming a milling lobby keeps rice prices high with the help of government import taxes, restricting the economic freedoms of the poor and hungry.

To force people to eat expensive rice, and give large profits to wheat mills taxes on wheat flour is also kept high, while raw wheat is allowed in barely taxed.

Sri Lanka Maha paddy crop this year is expected to be down by around two million tonnes following a drought in 2016. (Colombo/Jan30/2017 – updated/corrected – special commodity levy Rs5 nor 15)