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Sri Lanka cuts taxes on food imported from India

The Sri Lankan government has drastically cut taxes on essential foods, most of which are imported from India.

business Updated: Jan 09, 2008 11:23 IST

Faced with the grim prospect of a crippling island-wide traders' strike, the Sri Lankan government has drastically cut taxes on essential foods, most of which are imported from India.

Hemaka Fernando, media secretary of the Essential Food Commodities Importers and Traders Association (EFCITA) told IANS on Tuesday night that the government had cancelled the taxes imposed on December 25 last year and introduced more reasonable rates.

This would enable the India-Sri Lanka trade in essential foods to survive and the people of Sri Lanka to get essential commodities at reasonable prices.

The taxes per kg will now be: Bombay (big) onions Sri Lanka Rs 20 ($0.18), potatoes Rs15, moong beans Rs13, chick peas Rs15, yellow split peas Rs15, chillies Rs30, sugar Rs14 and split lentil Rs 6. The bulk of these commodities are imported from India.

Fernando said that the importers and traders had given up their opposition to a government plan to set up a state owned company to import and distribute essential food items with a view to bringing down the crushing cost of living.

"We are assured that the food imported by the government company would be very small in quantity, and that they would be sold only to the poorest of the poor through the samurdhi poverty alleviation scheme," he said.

On Monday, Commerce and Consumer Affairs Minister Bandula Gunawardene told the media that the government would establish the State Trading Cooperative Wholesale Company at a cost of Rs.1.2 billion ($11 million). It will distribute food through 306 cooperative outlets nation wide. The company would come into existence January 15.

Late last year, when the government announced its plans to set up the company, importers and traders fought it tooth and nail and threatened to go on an island wide strike.

They said the gigantic state owned company would not only fail to function properly like other public sector institutions, but would drive hundreds of traders and importers out of business. This would have been the second blow in quick succession after the hike in taxes on December 25. Indian exporters of essential foods to Sri Lanka would also have been hit hard by the strike.