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Sri Lanka cuts protectionist tax on potatoes as food prices rise

ECONOMYNEXT – Sri Lanka has cut a protectionist tax of 50 rupees a kilogram on imported potatoes, slapped to boost profit of the farming lobby, to 25 rupees as prices of rice and wheat also spiked in December.

The lower tax on imported potatoes will be effective from December 25, the Finance Ministry said.

Landowners in Sri Lanka central highlands rent their land to farmers to grow potatoes due to fat profits from import duty protection, in classic rent seeking behavior with no incentive to boost yields to levels seen in other countries or bring down costs.

Finance Minister Mahinda Rajapaksa had issued a gazette notice from midnight December 25, as vegetable prices went up.

Domestic potatoes would come to the market from around February and farmer profits would not be hurt by the tax cut. (Colombo/Dec26/2019)