Bandula’s plan to cut COL misfires

The Treasury, in a move that caught food importers by surprise, reintroduced import duty on all commodities this week just a few days before a crucial scheme to reduce prices of essential food commodities takes off.

The import duty, only applicable to certain importers conducting business with the government, was in force from December 1, 2006 to February 15, 2007 and brought in at a time when the cost of essential goods in the international market had risen fuelling inflation.

The importers continued to import on the same terms – even when the shipment was arriving after the duty waiver lapsed on an assurance from the Minister of Trade, Marketing Development and Consumer Affairs, Bandula Gunawardena that the waiver would be extended. That didn’t happen when they went to clear the goods from Customs after February 15.

With the new turn of developments and the reintroduction of import duties on essential commodities, the implementation of that plan is now on a shaky path.

The duty waiver for the 2-month period was enjoyed by a few importers. The Consumer Affairs Authority was responsible for the price mechanism at which these goods were sold at on the local market.

The minister's price-cutting plan, unveiled the previous week, is to go into effect from March 1 and would include duty free concessions on food items such as sugar, dried chillies, onions and potatoes.

According to Hemaka Fernando, Media Secretary for the Essential Food Commodities Importers and Traders Association, they are unaware as to why the import duty was reintroduced. He added that the Treasury has called for the reintroduction of the import duty in contradiction to the minister's plan.

Fernando said the minister had already asked importers to forward purchase agreements with overseas suppliers.

"This is a complicated mechanism that the minister asked us to perform but we supported what the government wanted us to do," he said. "The government promised that they would give a duty waiver." Fernando explained that they had directed their overseas principles to continue loading the supplies so that there would be no shortage of goods in the country.

However on February 17 the Customs refused to process entries by declaring that the duty had been reintroduced. Subsequently the minister asked the Treasury to revive the duty but this was not complied with. On Wednesday, the Treasury officially informed importers that the duty will continue.

As a result, importers had to inform their overseas suppliers that they could not enter into a forward agreement. "Precious cargo shipped for human consumption is rotting in the hot sun and perishing in the harbour," said Fernando. He explained these goods were supposed to be sold at a very low price but since the duty waiver has not been abolished, Fernando questions if the agreement can now be binding.

President of the Moors Street Traders' Association K. Sundaram Palaniyandi told The Sunday Times FT that potatoes and onions are decaying in the Colombo harbour. "The government promised to give duty free concessions and now they are not," he said. "The minister promised to give duty free to importers and the agreement was signed. Business people signed the contract. That agreement is going to be cancelled. The minister said he couldn't do anything."

Other importers who contacted the minister said the latter had agreed to extend the duty free waiver from February 15 until February 28 but did not come though. "He (minister) asked us to pay the duty until the end of February and promised to reintroduce it in March," one importer said, who still feels that an agreement will not be reached with the government.

However Additional Secretary to the Ministry S. Edirisuriya confirmed to the Sunday Times FT that discussions between the minister and the Treasury are ongoing. Edirisuriya said that further discussions between all parties will continue and a final agreement should be worked out by the end of this coming week.