Concessions on dairy: Investment value $ 10 or 25 m?

The Government’s 2021 Budget presented yesterday caused early confusion over the quantum of investment required to enjoy concessions announced in the dairy sector. 

One proposal said investments exceeding $ 10 million, with potential to change the landscape of the economy in the areas of dairy among others, will enjoy concessions up to a maximum of 10 years under the Strategic Development Law. This proposal was under the Savings and Investment section of the Budget 2021 Speech. 

However, when speaking of the local dairy industry specifically, Prime Minister and Finance Minister Mahinda Rajapaksa referred to investments of over $ 25 million, which will enjoy strategic investment tax concessions for five years. 

He proposed to provide the deprecation in two years in concern to the capital investments done on latest technology to collect local liquid milk in collaboration with local dairy farmers, enhancements to milk-related productions and promotion of liquid milk.

“I also propose to provide strategic investment tax concessions for a period of five years for capital investments of over $ 25 million, with the view of facilitating these companies to process milk powder exports instead of importing milk powder,” he added.

In justifying the proposals, Rajapaksa said a key policy priority of the Government is to gradually reduce the foreign exchange utilised amounting to more than $ 300 million per annum (Rs. 55 billion), on the import of milk power and meet the increasing demand for liquid milk through domestic dairy production. 

Directing the large foreign exchange outflow in importation of milk powder to local farmers and producers will result in an expansion of the agriculture sector and creation of alternative income sources for rural farmers, he said. 

Plans to import dairy cattle for the development of the Rideegama and Bopaththalawa farms of the National Livestock Board were also announced. Rajapaksa also proposed to increase the Government contribution to develop small-and-medium-scale dairy farms through extension services, which supports the dairy cattle for breeding. 

“I propose to implement a loan scheme to provide special loan facilities up to Rs. 500,000 at an interest rate of 7.5% per annum for the purchase of dairy cattle, setting up of eco-friendly cattle sheds and purchase of equipment for small-and-medium-scale dairy farms,” Rajapaksa said in his Budget 2021 speech.