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Wednesday May 12th, 2021
Economy

Sri Lanka sugar SOE making profits after ethanol ban

ECONOMNEXT- Lanka Sugar Company (Pvt) Ltd, built by re-expropriating two privatized firms, are now making profits after ethanol imports were banned, a government statement said.

Lanka Sugar Company (Pvt) Limited which had made continuous losses has made a profit of 1,100 million following the ban on ethanol imports, a statement said. The period was not mentioned.

About 2,500 employees who were on contract basis for about some 20 years have been made permanent and given promotions and bonuses from the profit, the Chairman of Lanka Sugar Company had said at a meeting of state enterprises heads with President Gotabaya Rajapaksa.

Imported ethanol however used to be taxed at high rates before the ban. It is not clear how much taxes are lost due to the import ban or whether smuggling has increased after the import ban.

Lanka Sugar is also making hand sanitizer. In is facebook page sanitizer is offered at 4,500 rupee per five litre can.

Sri Lanka is also taxing brown sugar at a higher rate than white sugar to give higher profits to state-run sugar firms, Treasury Secretary S R Attygalle said last month.

Though the import of white sugar tax was cut to 25 cents a kilogram, brown sugar import duty is kept at 15 rupees to discourage imports give profit to the SOE.

Therefore in Sri Lanka brown sugar is more expensive than white sugar.

Inefficient import substitution firms make profits by ‘tax arbitrage’ or by channelling the difference between the actual world price and an artificial or ‘blackmarket’ style price maintained by the import restriction to themselves rather than the Treasury.

The last administration which imposed a sugar tax on drinks including natural ginger beer and forced producers to use artificial sugar driven by engineering interventionists also taxed brown sugar at 15 rupees a kilogram keeping its price higher than white sugar and discouraging its use.

Both sugars are nutritionally almost similar but brown sugar has a molasses content which contains some minerals.

Domestically ethanol is now also made by maize. Sri Lanka has also banned the import of maize to give profits to farmers and a so-called ‘collector mafia’ and promote import substitution.

The import controls have pushed up domestic maize prices. Meanwhile smaller chicken farmers went out of business in the last season as retail prices fell and maize, the main ingredient of feed, soared. Now chicken prices have soared and maize prices are also high.

Now permission has been given to import wheat, which is not grown in Sri Lanka. The global price of wheat however is more expensive than maize. (Colombo/Apr23/2021)

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