Confectionery industry troubled by increased import levies

Monday, 22 June 2020 01:59 -     - {{hitsCtrl.values.hits}}

  • Govt. slaps 340% special commodity levy on block fat, margarine
  • Industry already impacted by increased taxes on palm oil and sugar
  • Suffers Rs. 500 m to Rs. 600 m additional cost per month with import tax increase
  • Already 2 SME firms up for sale, survival in the sector a challenge
  • Says no formal acknowledgment from Govt. for their concerns

By Charumini de Silva

The confectionery manufacturing industry yesterday expressed concerns over its survival and security of jobs, following successive tax hikes on key raw material imports by the Government.

In addition to the increased import taxes on palm oil and sugar, the Government on Wednesday has slapped a fresh 340% special commodity levy on block fat and margarine, causing worry over all of the confectionery manufacturing industry.

“Survival of the confectionery manufacturing industry is now in jeopardy, following the recent increase in import levies. It has caused significant stress and additional burden to both the manufacturers and the consumers,” Lanka Confectionery Manufacturers Association (LCMA) Chairman S.M.D. Suriyakumara told the Daily FT.

He said the increased import levy on palm oil, sugar and block fat together will result in an additional cost of Rs. 500 to Rs. 600 million per month, adding that it will compel the manufacturers to increase the prices with immediate effect.

“This increase will significantly impact the cost of manufacturing of confectionery products. Due to this significant increase in import levies, it is not viable to manufacture fast-moving smaller pack sizes, which accounts for nearly 40% of the business. From the costing done so far, we assume that the prices of all confectionery products will be doubled or more, while it will also be unaffordable or a dream for many citizens,” Suriyakumara said.He pointed out that it was impossible for companies to keep prices at the same level going forward, unless the Government intervene and provide a concession to ensure the continuity of their operations.

“On top of the import tax hikes, we have to bear the costs of the healthcare facilities provided for the employees due to COVID-19 pandemic. Therefore, even with a price hike in products, it will still be very tough to match the prices,” he said.

In addition, he said price escalation by major players for survival will allow substantial low-cost imported confectionery products flooding the local market, which is an existing problem too.

“There is a possible deterioration of quality standards of confectionery items available in Sri Lanka as a result of the low industry profitability and cheap and inferior imports flooding to the market, draining the foreign exchange and risking the lives of the future generation,” he warned.

Noting that two SME companies faced with cash flow issues has put them up for sale, he warned if the situation continues there will be many confectionery manufacturing firms closing down their businesses.  “Survival in the industry will now be a major issue,” he added.

When asked if they lobbied their woes to the Government, he said the association has still not received any formal acknowledgement to their concerns.

LCMA also stressed that the increased import levies of critical ingredients which are not manufactured in Sri Lanka will only prevent or delay in achieving the vision of being a prosperous nation. “Today we are having a meeting with the Coconut Research Institute (CRI) to see if they could help the industry in developing a coconut-based product that will suit our business. We are all game to use Sri Lankan products and help the economy grow,” Suriyakumara said.

According to LCMA, the confectionery industry provides direct employment to over 50,000 and around 600,000 are indirectly dependent. The national supply chain network involves over 150,000 retailers across the country. The industry’s products are on par with the best in the world and Sri Lankan companies also export to over 55 countries with an annual export income of $ 100 million.

The industry consists of companies producing biscuits, cookies, cakes, wafers, toffees, chocolates, desserts, snacks, ice cream, etc. Sri Lanka’s confectionery industry, which was built on over many decades of hard work, contributes over 85,000 metric tons per annum to the national food supply chain.

“Confectionery manufacturing industry contributes significantly to the national economy in terms of GNP and foreign exchange earnings as well. Therefore short-sighted policies will impact the viability of exporting confectionery products manufactured in Sri Lanka,” he warned.