Business

Local milk producer opposes price reduction

The Consumer Affairs Authority (CAA)’s recent move to reduce the price of imported milk powder due to the Government’s recent tax concession has distressed Sri Lanka’s local milk producers, The Sunday Morning Business learns.
Price of a 1 kg packet of imported milk powder was reduced by Rs. 40 and a 400 g packet was reduced by Rs. 15 from 9 December as a result of President Gotabaya Rajapaksa’s recent move to slash the Value Added Tax (VAT) from 15% to 8%.
Pelwatte Dairy Industries Ltd. Founder Chairman Ariyaseela Wickramanayake, commenting on the price reduction, told The Sunday Morning Business that other tax components on imported milk powder should be increased to fill the difference due to the tax concession given via the VAT reduction.
“I understand VAT came down and the import price has been reduced, but what the Government should do now is increase other taxes so that milk importers have to pay the same percentage of taxes despite the VAT concession,” Wickramanayake noted.
Further, he noted that Sri Lanka does not need to import milk powder, as local production is sufficient to supply 80% of the national milk demand. Wickramanayake is now planning to have a discussion with the new Government to highlight the milk mafia that has been in operation over the years.
“We have enough local production. It keeps increasing over the years. On the other hand, there is a hike in imported milk powder as well. How can this happen?” Wickramanayake questioned.
Speaking to The Sunday Morning Business in September this year, Wickramanayake had noted that despite sufficient local milk production that could cater to local demand, government officials keep supporting the importation of milk powder.
According to the annual reports from the Central Bank of Sri Lanka (CBSL), Sri Lanka’s milk and milk powder imports have been growing gradually since 2015 and reached Rs. 54 billion in 2018. In 2015, milk and milk powder imports were accounted at Rs. 34 billion, while it was Rs. 36 billion in 2016 and Rs. 48 billion in 2017.
Meanwhile, national milk production was also on the rise as it reached a record high of 471.5 million litres in 2018, from 396 million litres a year ago, and the number keeps growing gradually.
He added that such unnecessary importation of milk, while it was possible to depend purely on local production, results in losses from Sri Lanka’s foreign exchange earnings and a weakening rupee.
Further, he noted that the local dairy industry at the moment caters to 80% of the national milk requirement and is capable of catering to even 100% if given the opportunity.
He added that the remaining 20% of the requirement can be addressed with the utilisation of 240,000 additional cows for milking purposes. According to Wickramanayake, at the moment, Sri Lanka has 1.3 million cows, from which only 240,000 cows are being used for milking purposes, allowing imports to be dumped in the country.
He proposed the removal of taxes on local milk, similar to India, so that it would encourage local milk production even further.