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Bread prices to rise on palm oil tax

13 Jan 2021

By Dinitha Rathnayake   The prices of bakery products, including bread, would be increased by early February unless the import tax on palm oil is reduced by the Government, the All Ceylon Bakery Owners’ Association told The Morning yesterday (12). The Association’s President N.K. Jayawardena said that the price hike would be put into effect unless the Government reduces the tax by Rs. 100 for one litre of palm oil from its current Rs. 250. “We already spoke to the relevant officials but did not find any solution. We sent a letter to the Ministry of Trade highlighting these facts but we have received no answer. We request the Government to take immediate action regarding this issue or we would have to increase the prices of bakery products from the first week of February.” The impact of the palm oil tax is that the price of margarine, a primary ingredient of bakery products, has gone up by 150% in six months, according to bakery owners. “We use margarine as our main ingredient. It is made out of palm oil. In July 2020, one metric tonne (MT) of palm oil cost around $ 450 and the current cost of one MT of palm oil is around $ 1,050, a 150% increase. Six months ago, we spent only Rs. 4,800 per 20 litres of palm oil but now we have to spend around Rs. 10,000 per litre, a price we cannot afford,” Jayawardena said. He added that the recent increase of the import tax of palm oil had caused significant stress on Sri Lankan confectionery makers and bakers, and imposed additional burdens on both the manufacturers and consumers of these products. When The Morning spoke to Ministry of Trade Secretary J.M. Bhadranie Jayawardhana, she said that the tax increase was imposed based on points raised by the Ministry of Plantation due to a few reasons. “The previous palm oil tax was low and ordinary traders sold coconut oil while mixing it with palm oil. Subsequently, a request came to increase the relevant tax. Palm oil has also been accused of being unhealthy. We are in the process of importing refined palm oil and taking steps to slow down the use of raw palm oil with the help of the Consumer Affairs Authority,” Jayawardhana added. According to Jayawardhana, the Trade Ministry is ready to talk with the Bakery Association about the matters they point out. The Council of Palm Oil Producing Countries (CPOPC) recently stated that palm oil prices will continue to rise in the first half of 2021 as global supply is squeezed due to disruptions from persistent heavy rainfall in South East Asia, and that the global supply would remain tight until the first quarter of next year. It cautioned that it sees structural changes in the global palm oil supply from 2021 onwards due to a slowdown in new plantings across top producers, Indonesia and Malaysia, since 2015. “It must however be highlighted that Indonesia’s smallholders, replanting oil palms totalling 500,000 hectares by the end of 2022, should sustain an adequate palm oil supply for the world,” the CPOPC said. Indonesia and Malaysia, the two biggest producers of palm oil, have limited expansion of new plantations in response to criticisms of deforestation and the destruction of natural habitats.    


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