Treasury disburses Rs. 17 b for guaranteed prices, subsidies promised in Budget 2015

Saturday, 15 August 2015 00:00 -     - {{hitsCtrl.values.hits}}

The Treasury has released Rs. 17.18 billion to relevant ministries for the expenses incurred to maintain the guaranteed price for tea, rubber and paddy purchasing and other subsidies announced in the Interim Budget 2015.

A Finance Ministry statement said the expenditure also includes the 50% reduction of farmers’ loan and 15% interest on fixed deposits for the senior citizens.

The Government expects to purchase 120,000 MTs of paddy under the guaranteed price during this Yala season and the Treasury has issued a guarantee for a pledge loan of Rs. 6,000 million to the two State banks where the Bank of Ceylon will provide Rs. 4,000 million and People’s Bank will provide Rs 2,000 million to the Paddy Marketing Board (PMB). 

During the 2014/2015 Maha season, the Treasury released Rs. 7,500 million to the Ministry of Food Security and bought 160,000 MTs of paddy with the aim of maintaining the price stability, however the stock has not been released to the market up-to-date.

The Treasury has also allocated Rs. 312 million to the Ministry of Food Security as the maintenance cost of the paddy purchasing initiative during this Yala season, where Rs. 30 million has already been released to cover the initial cost.

According to the statement, the Government’s allocation for the purchasing of tea leaves at Rs. 80 per/kg was Rs. 6,300 million. Thus far Rs. 5,532 million has been released to the Ministry of Plantation Industries in order to repay for the tea leaves purchased by 712 factories around the country. 

In order to mitigate the difficulties faced by the factory owners from the recent global downturn in the tea prices, the Government introduced a loan scheme to provide them a month’s working capital with subsidised interest rate of 2% via commercial banks at a concessionary interest rate of 6%. As a result of this loan scheme introduced, the Treasury would to incur an expenditure of Rs. 258 million annually. 

Another scheme proposed by the Interim Budget was to purchase sheet rubber at a guaranteed price of Rs. 350 per/kg from the rubber smallholders who are having less than 50 acres of land. 

The country produces around 6,000 MTs of rubber annually and more than 75% of this is produced by the 130,000 rubber smallholders. In the past, this subsidy was not directly paid to them at the time of purchasing. However, under the new scheme the traders will buy sheet rubber under guaranteed price later to be reimbursed by the Department of Rubber Development. A sum of Rs. 3,600 million has been allocated to purchase rubber under the guaranteed price of Rs. 350 per/kg.

Relief for articles pawned in the State banks was another first of its kind measure introduced by the Interim Budget 2015. Accordingly, the interest rate of the pawned items which has a value less than Rs. 200,000 and falls into the non-performing category by 31 January 2015 will be reduced up to 12% and released to the owners.

Around 36,000 people who had pawned their jewellery under higher interest rates up to 22% in the past have been benefitted under this scheme and the Treasury has so far disbursed Rs. 93 million to six State banks for the relief provided, the statement said.

Farmers who have obtained agricultural loans to the maximum of Rs. 100,000 were given the relief of 50% reduction of the loan obtained from four State banks — Bank of Ceylon, People’s Bank, Regional Development Bank and the Lanka Puthra Bank. 

Farmers are given short-term agricultural loan for 32 varieties of crops and the past governments re-scheduled the repayment scheme when their crops were hit by natural disasters. However, no Government in the past gave such a concession by reducing their loan amount by 50%. The Treasury has released Rs. 780 million to these four State banks to offset half of the loan amount obtained by 58,000 farmers islandwide. The total allocation for this project was Rs. 2,500 million. 

Meanwhile, senior citizens were given a special rate of interest of 15% for their fixed deposits up to Rs. 1 million maintained at any commercial bank. The Treasury has incurred an expenditure of Rs. 1,067 million providing benefits to 140,791 depositors for the first two quarters of the year. The expected amount to be spent for the payment of 15% special interest rate for the deposits of the senior citizen per year is Rs. 4,000 million.