ECONOMYNEXT – Sri Lanka has removed import tariff protection for highly profitable domestic ceramic tile manufacturers, an effective monopoly controlled by the Royal Ceramics group, according to the government’s 2016 budget and analysts.
Finance Minister Ravi Karunanayake said import-related duties will be revised downwards on building materials such as steel, tiles and sanitaryware.
“To address the short supply and high prices of building materials such as steel, tiles and sanitary ware, import-related duties will be revised downwards,” he said.
These products will also be remove from the negative list of the Board of Investment, enabling companies operating under the investment promotion agency, which gives tax breaks, to freely import tiles and sanitaryware.
But Karunanayake also said a new valuation system will be introduced to curb under invoicing of imports like tiles with effect from January 01, 2016.
“The tile sector may suffer from increasing competition stemming from lower margins and new entrants to the industry,” First Capital Equities said in a note on the budget.
.Bartleet Religare Securities said the proposed reduction of import duties on tiles and sanitaryware, currently at around 77 percent, would impact local manufacturers Royal Ceramic Ltd., Lanka Tiles and Lanka Walltile.
The new customs duty rate has not yet been specified.
“Despite the present protection, the tile industry faces intense competition from imports from China, India, Bangladesh and Indonesia,” Bartleet Religare Securities said in its budget analysis.