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Friday December 9th, 2022

Sri Lanka plans talks on pepper trade barrier slammed by India

ECONOMYNEXT – Sri Lanka is planning talks with India to relax a minimum import price for pepper, a non-tariff barrier erected by India which has slashed exports of the spice by the island, a minister said.

"I will be travelling within the next 10 days together with two members of The Spice Council to meet India’s Minister of Agriculture," Primary Industries Minister Daya Gamage said in Colombo.

"I will also meet Indian spice processors, and as a government will sign an agreement with them to sell pepper at a certain price."

India slapped a 7,700 US dollar minimum import price per tonne of Sri Lankan pepper in December 2017, after Indian traders had apparently started to route the spice via Colombo using its entrepot facilities, falsely declaring the product as being from the island after value addition.

Sri Lankan pepper is allowed to be exported to India at zero duty for up to 2,500 tonnes under the Indo-Sri Lanka Free Trade Agreement. Any exports above the limit are subject to an 8 percent preferential duty under the South Asia Free Trade Agreement. Customs duties on pepper imports to India are at 70 percent.

Sri Lankan pepper is more expensive due to a due higher content of piperine, which gives pungency and quality to pepper, industry officials say.

Indian spice growers had claimed that Vietnamese pepper, which was cheaper, was coming from Sri Lanka.

"One or errant two traders, together with shipping companies forged documents to show that Vietnamese pepper shipments were Sri Lankan," Gamage said.

"Some of these shipments did not even enter Sri Lanka and were just transshipped."

When India slapped the minimum import price of 7,700 US dollars, Sri Lanka was selling pepper at 4,600 US dollars a tonne and world prices were around 4,100 US dollars.

Pepper prices are currently around 3,000 US dollars per tonne.

Gamage said that world pepper prices had fallen after growth in output from Vietnam over the past two years.

A stronger dollar had also kept commodity prices down during the period.

Indian spice growers had lobbied to stop all imports of pepper from Sri Lanka under the free trade deal, leading to the non-tariff barrier in the form of an exhorbitant minimum price.

The minimum price had slashed Sri Lankan pepper exports to India by 75 percent, Minister Gamage said, as Indian traders were unwilling to purchase at exorbitant prices.

Some were still buying in smaller quantities to use in niche products such as specialty sauces, he said.

In 2017, pepper exports to India were 63.7 million US dollars, or 75 percent of total Sri Lankan pepper exports, according to the International Trade Centre. 

Sri Lanka accounted for just over a third of India’s pepper imports in 2017.

Just over a third of Sri Lanka’s 29,546 metric tonnes of pepper produced had been exported to India during that year.

Data is not yet available for 2018. Gamage said that Sri Lanka’s pepper exports to the world in 2018 had been near the 2017 levels, due to diversification of clients.

The re-exportation of pepper from Sri Lanka was banned after India’s allegations, while Sri Lanka’s exports were subjected to more stringent customs checks.

Gamage said that may not be completely eradicate pepper re-exports, similar to how the country has not been able to fully stop the drug trade from pushing through cracks.

In East Asia, where trade is free and people are getting more affluent, a younger generation is growing up well nourished and taller than their parents due to free trade.

But in South Asia consumers are held hostage by producer lobbies who have political clout and poverty and malnutrition is more prevalent, free trade advocates say. (Colombo/Aug07/2019- Updated at 21:50 with export data, duty structures)

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Sri Lanka president slams power regulator chief after conflicting with minister

ECONOMYNET – The powers to change the electricity tariff in Sri Lanka is vested with the Minister of Power and not the Public Utilities Commission (PUCSL), President Ranil Wickremesinghe told the Parliament.

The minister of Power and Energy, Kanchana Wijesekara has requested an upward price revision to be implemented in two phases both in January and July next year, saying the recent tariff hike was not enough for the state-run utility provider Ceylon Electricity Board (CEB) to continue uninterrupted power supply.

However, Jaynaka Ratnayake, the Chairman of the PUCSL had said  the recent tariff hike is enough for the CEB to cover the cost of production and it will not allow another price hike. However, he has said a twice a year price revision is necessary though it should be in April and October instead of January and July.

President Wickremesinghe said the PUCSL chief was opposing the tariff hike due to his personal reasons.

“The power is vested with the Minister and me. I am the one who made the PUCSL act and I know what is in it,” Wickremesinghe told the parliament on Thursday. quoting a letter from the Attorney General which mentioned provisions in the island nation’s Electricity Act.

Accordingly the Act, the PUCSL would be statutorily obliged to give effect to such policy. It is observed that neither the Act nor the PUCSL Act contains any provisions that empowers the PUCSL to change or act invariant of such policy guidelines.

“The Chairman of the PUCSL is misguiding the general public. I have to meet him and see,” Wickremesinghe said.

WIckremesinghe said the Chairman does not want the tariff hike because he owns one of the highest electricity consuming companies.

“He is the Chairman of the Trillium corporation. It is the firm that takes up the most energy”, he said.

The Trillium group is managed by Janaka Ratnayake and he also holds positions as the chairman and CEO of Trillium Property Management & Services Ltd., City Housing and Real Estate PLC, Trillium Residencies Ltd., Computer Care (Pvt) Ltd., and Rent a Comp Services (Pvt) Ltd., and JR Management Consultants (Pvt) Ltd.

“It means when the electricity bill increases, his expenses increase as well”

He said the CEB still has a loss of 300 billion rupees since 2013 and it needs to be covered.

The CEB issue can be solved only in three ways, either printing more money, increasing value added tax or increasing the tariffm, he said. (Colombo/Dec08/2022)

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Sri Lanka President bemoans over inconsistent LNG deals

ECONOMYNEXT – Sri Lanka President Ranil Wickremesinghe bemoaned over successive governments’ liquefied natural gas (LNG) deal that has brought in all the world powers into the discussion.

Wickremesinghe’s center-right United National Party (UNP) had discussions with India and Japan between 2002-2004 for an LNG project.

“Following dialogues with India and Japan, the UNP government could come to agreements to get two LNG power plants. After we were defeated the successor government, without cancelling those agreements granted it to New Fortress company in USA,” Wickremesinghe told the parliament.

“Thereafter, as they did not like New Fortress, they gave it back to Pakistan and China. So within the same premises, there were China, Pakistan, India, USA, Japan and only Russia was not there.”

“It was wonderful that a world war did not ignited there as there were five main powers in the world.”

“Now there is no LNG or anything here and now they ask me to solve this issue.”

Wickremesighe’s outburst comes as his government is forced to raise tariffs on power prices after successive governments failed to implement cheap and renewable power generation projects.

He said a total loss for the state-run Ceylon Electricity Board since 2013 was 300 billion rupees and a possible drought next year could increase the 2023 electricity cost to 420 billion rupees.

“If it rained, we need Rs. 352 billion while Rs. 295 is required if rained so much to have floods. How are we going to find this money? We would have to print money, but Rupee would depreciate. We would have to increase VAT but it would increase the price of all commodities or to charge it direct.” (Colombo/Dec08/2022)

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Air quality drop forces Sri Lanka to close schools; public warned

ECONOMYNEXT – A rapid drop in air quality in Sri Lanka has forced the Colombo government to close all schools across the country after a deep depression over Southeast Bay of Bengal, officials said.

The Education Ministry, issuing a special notice on Thursday said, it has decided to close all government schools for Friday, after discussing with the officials in Meteorology Department and Disaster Management Center.

An official said the drop was due to the deep depression over Southeast Bay of Bengal carrying the air from India.

Due to the depression over South east Bay of Bengal (370 km east of Trincomalee) has concentrated into a cyclonic storm “Mandous” by Wednesday night.

“Cyclone in the Bay of Bengal that is the prime reason for the increase in the pollution load as we receive more wind from India,” H.D.S.Premasiri, Senior Scientist, Coordinator-Air Quality, noise and vibrations at National Building Research Organization (NBRO) told EconomyNext on Thursday.

Officials said there is a likelihood of the cyclone moving west-northwestwards and further intensify into a severe cyclonic storm tonight and cross North Tamil-Nadu, Puducherry and South Andhra Pradesh coast around midnight of 09 th December and the maximum wind speeds will be 70-90 km per hour and can increase up to 90 in sea areas.

“Hopefully, today we can expect normalization in the environment and the effects of the fog will disappear”.

According to the NBRO’s real time Air Quality Index Indicator, the quality of air in northwestern coastal district of Puttalam has dropped drastically and indicated a particular matter (PM) 132, while Kegalle (85) and Mannar (84) were the districts which had next worst air quality.

According to NBRO, Battaramulla, Polonnaruwa, Dambulla, Kegalle, Mannar and Puttalam indicate a poor quality of air due to higher PM.

“The fog will lead to lung and breathing issues,” Premasiri said.

“So the public is warned to wear a mask when they travel outside. The pollution highly prevails in city areas and has a less impact on the other parts of the areas.” (Colombo/ Dec08/2022)

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