Powerful businessman blocks moves to allow tile imports
It was a battle between two powerful lobbies – the tile importers group and powerful interests representing local tile manufacturers. Eventually the local manufacturers, fronted by a politically powerful businessman who also controls Sri Lanka’s largest added value rubber products group, won the day.
The result: The last minute cancellation of a gazette which was to allow tile imports, a decision made by a powerful bureaucrat apparently influenced by local manufacturers.
The relaxation and reinforcement of the over 10-month restriction on tiles and ceramic product imports by the government within less than 24 hours has aroused curiosity and confusion in the building material industry including consumers and traders.
The story goes how the Finance Ministry first issued a directive in a gazette notification on Wednesday under the signature of subject Minister and Prime Minister Mahinda Rajapaksa relaxing the import restrictions on tiles and ceramic products. However on Thursday, the Import and Export Control Department issued new operating instructions for Sri Lanka Customs and all commercial banks at around 10 am suspending the implementation of the PM’s regulation until further notice.
These operating instructions have been issued under the power vested in the Imports and Exports Control Act No.1 of 1969 and in terms of Regulations No.17 of the Gazette Extraordinary No.2184/21 dated 16, 2020.
The sudden decision to reverse the Finance Ministry action has been taken on a directive issued by a powerful bureaucrat who has garnered media headlines for his involvement in top decisions, informed sources revealed.
This high authority has made this 360 degree reversal due to pressure exerted by domestic ceramic tile manufacturers wielding oligopoly at present as a result of the tile import ban, tile and ceramic product importers alleged.
The Treasury had relaxed the restriction on imported tiles and ceramic products after considering the current issues faced by consumers and traders as well as the severe shortage and high prices of such items following careful study and evaluation of the tax revenue losses, official sources said.
The Finance Ministry was contemplating a tax revision on tiles and ceramic ware imports to the previous level of at least 77 or 80 per cent with the aim of protecting local manufacturers following the relaxation of the current import restriction, these sources said.
However the decision to relax the import restrictions has been taken by the Treasury on the directions of Prime Minister Mahinda Rajapaksa after evaluating all implications on the local ceramic product market, a senior official said. It has been revealed that around 100 containers of ceramic products imported to the country were awaiting clearance from Customs at present and importers had been forced to pay demurrages and other additional charges.
The prices of tile and ceramic ware sky rocketed by 100 -150 per cent at present from earlier prices and there is severe shortage of products in the local market.
The country will be losing Rs. 15 billion as taxes per annum, several local importers said adding that with the present depreciation of the rupee they are faced with bigger issues as they buy in dollars and sell in Sri Lanka rupees.
At present, this industry provides direct and indirect employment to around 50,000 individuals island-wide with over 2,000 dealers countrywide.
All of them are being severely affected as the import sector has already collapsed inflicting a spillover effect on auxiliary related industries such as warehousing and logistics, clearing and forwarding, banking and finance, construction and commercial real estates.
It will increase unemployment among a large number of professionals such as architects, engineers, consultants, quantity surveyors, sub-contractors as well as tile masons and daily wage earners, they warned.