Increasing import taxes on maize – same old folly

Last week, the Government increased the Special Commodity Levy (SCL) on imported maize to Rs. 50/kg, up from the previous rate of Rs. 25/kg. The higher levy will remain effective from 5 May  to the end of this year. The Government intends to support local farmers via the move by discouraging cheaper imported maize. According to the analysts, local poultry companies are likely to see their maize import costs going up by around 20% because of the para-tariff rate increase, and it is estimated that corn accounts for about 40% of their animal feed cost.

The decision by the administration, however, contradicts with its pre-election rhetoric as President Anura Kumara Dissanayake strongly criticised the practice of imposing taxes on food items during the previous presidential election campaign as a candidate and vowed to bring down taxes imposed on food items for the benefit of the masses.

Maize is a major energy feed ingredient in the diets of poultry, and Sri Lanka’s local maize production is not sufficient to satisfy the demand. As per the Food and Agriculture Organisation, the national requirement is estimated at approximately 600,000 to 700,000 MT per year, but the domestic production covers only around 50% of the total requirement. The ill-advised move would lead to an increase in the prices of eggs and chicken that form vital elements of the dietary protein intake of the islanders. Chicken is the preferred mode of protein in Sri Lanka in terms of meat, as the consumption of red meat among people is low due to cultural/religious reasons. On the other hand, eggs are the most sought-after source of protein because refrigerators are not commonly available across households.

It was due to the cruciality of both eggs and chicken with regard to the protein intake of citizenry, the Ranil Wickremesinghe administration brought down the SCL on the imported animal feed from Rs. 75/kg to Rs. 25/kg in August 2023 as part of efforts to alleviate high animal feed costs and thereby bring down chicken and egg prices. Apart from lowering taxes on imported animal feed, the then Government took steps to import eggs from India despite criticism to provide relief to consumers. During the presidency of Gotabaya Rajapaksa, the price of an egg went as high as Rs. 70 in the retail market and in certain instances eggs were not even available in the market as producers refrained from supplying the product due to price controls. Nevertheless, with the reduction in the SCL on maize, removal of the price ceiling as well as arrival of imported eggs from India, the price of an egg dropped to Rs. 35 in the retail market and to Rs. 50 in supermarkets during the Wickremesinghe presidency.

Inability to acquire protein-rich food at affordable prices has been a critical social/health issue in the republic over the last few years. Particularly, in 2022, Sri Lanka was ranked among the top 5 countries with the highest food price inflation, which weakened the ability of many households to satisfy their calorie needs. Moreover, Protein-rich fish like tuna are beyond the reach of commoners given their high prices.

Talavou Alailima, a prominent leader in the Sri Lankan fitness industry, has pointed out that lack of protein in the Lankan diet as the single most nutritional deficiency that hinders physical/cognitive growth of the nation’s children and their ability to maximize genetic potential. Protein deficiency has also been identified as a cause for mediocre/poor performance of our sportsmen/women in the international arena for decades.

In view of the nutritional requirements of the populace, especially children and youth, policymakers need to re-examine the suitability of hiking taxes on food and related inputs/items. Ensuring nutritious food is available to consumers at relatively affordable prices is a laudable accomplishment compared to indulging in lopsided protectionism, driven by ‘Vote Bank Politics’, to safeguard the financial position of a few politically influential farmer communities.