Business

Planters’ Association commends postponement of SVAT abolition, urges further reevaluation

Published

2 years ago

2025/01/21

The Planters’ Association of Ceylon (PA) has commended the Government of Sri Lanka for its decision to postpone the abolition of the Simplified Value Added Tax (SVAT) system to April 1, 2025. This decision, initially planned for January 1, 2024, followed strong opposition from a broad coalition of exporters and business chambers.

While the postponement provides some relief, the PA called on the Government to further ensure that the SVAT system would be retained until a proper and effective alternative can be implemented in consultation with all stakeholders.

“Such a system must ensure the Government does not face challenges with revenue while also protecting the cash flows of Sri Lankan exporters, who are already facing significant challenges in an increasingly volatile global economic environment,” Planters’ Association of Ceylon, Secretary General, Lalith Obeyesekere stated.

The SVAT system, which has been a critical support mechanism for the industry since its implementation in 2011, remains vital for the survival of both Regional Plantation Companies (RPCs) and smallholder tea farmers.

Stakeholders remain deeply concerned that the eventual removal of SVAT without a robust replacement could lead to significant income losses for all exporters – particularly tea and rubber smallholders – and disrupt the entire tea value chain. Historically, the Sri Lankan tea industry saw robust growth until 2014, with exports surpassing 300 million kg and generating earnings of approximately US$1.5 billion.

“In 2018, the Government at that time set an optimistic target of doubling national tea production by 2025. But this trajectory shifted dramatically following the ban on Glyphosate in 2015, and a complete ban on fertilizer and agrochemicals in 2021.

“Both decisions severely impacted crop yields. By 2023, tea production had plummeted to around 223 million kilos, with export earnings dropping to about US$1.3 billion. Approximately 480,000 smallholders in Sri Lanka depend on tea for their livelihoods,” The PA stated.

Smallholders receive approximately 68% of the total price that the tea fetches at the auction for their green leaf. However, with average earnings around Rs. 23,000 per month for those cultivating an average of 0.5 acres, the financial strain is palpable. The anticipated loss due to the eventual removal of SVAT could amount to an estimated Rs. 24 billion annually for smallholders alone, representing 18% directly borne by smallholder families.

The SVAT system’s role is particularly crucial as over 90% of Sri Lanka’s tea is exported. The industry is already grappling with cash flow issues exacerbated by delayed VAT refunds, which can get significantly delayed, taking up to six or seven years in some instances. As RPCs receive less revenue from auctions with tea exporters paying an 18% VAT on exports since January 1, 2024, the overall production levels are expected to decline further. For instance, with 1 kilogram of tea priced at Rs. 1,200, the 18% VAT amounts to LKR 216, totaling up to Rs. 1,416. Exporters are required to pay this VAT upfront, impacting their cash flow significantly.

Delays in VAT refunds ties up capital that could otherwise be invested in production and operations. The cumulative financial loss for the industry in 2023 has already reached an alarming average of LKR 5 billion per month, totaling around LKR 60 billion per year due to VAT complications. The imposition of VAT increases operational costs for RPCs and smallholders alike, leading to reduced profitability and potentially lower production levels over the next five years.

To ensure the long-term stability and growth of Sri Lanka’s tea industry, the PA emphasized the need for a strategic approach. Government intervention is critical, with policies that enhance access to fertilizer and essential agricultural inputs, thereby reducing production costs and boosting productivity. Additionally, streamlining VAT refund processes is imperative to ease financial pressures on exporters, enabling timely reimbursements and improving cash flow. Collectively, these measures aim to strengthen the industry’s competitiveness, drive sustainable growth, and place it back on a robust growth trajectory.

In 2014, Kenya’s tea production reached approximately 415 million kilos, and by 2023, this figure had risen to around 550 million kilos, showcasing significant growth in the country’s tea sector. In contrast, Sri Lanka has experienced a decline in tea production, which has also raised concerns among stakeholders.

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Business

ADB approves $100 million loan to boost skills development and jobs for youth in Sri Lanka

Published

21 hours ago

2026/10/2

Thilina Walpola

The Asian Development Bank (ADB) has approved a $100 million results-based loan to help Sri Lanka transform its technical and vocational education and training (TVET) system, equip more young people with industry-relevant skills, and strengthen the country’s competitiveness and inclusive growth.

The Skills Development System Transformation Program will support the Government of Sri Lanka’s efforts in improving the quality and relevance of skills training, strengthening links between training providers and industries, and expanding employment opportunities for youth. The program will increase women’s employment opportunities in nontraditional jobs in fields including automotive technology, engineering, information and communications technology, construction, and renewable energy.

“A skilled workforce is essential to Sri Lanka’s long-term economic transformation and competitiveness,” said ADB Country Director for Sri Lanka Shannon Cowlin. “This program will help create stronger pathways from education to employment by making training more responsive to industry needs, expanding opportunities for young people and women, and ensuring that graduates have the skills required by a modern and evolving economy.”

Though Sri Lanka’s economy is recovering, it faces skills shortages in priority sectors, high youth unemployment, and low female labor force participation. Many employers report difficulty finding workers with the skills needed in a changing economy.

Aligned with the Government of Sri Lanka’s Technical and Vocational Education and Training Sector Strategic Framework 2026–2035, the nationwide program will be implemented from 2027 to 2031 and is expected to directly benefit more than 100,000 young people through improved access to quality, employment-oriented training.

Business

USD 40.84m pipeline to secure aviation fuel supplies to BIA

Published

21 hours ago

2026/10/2

Thilina Walpola

By Ifham Nizam

The government has cleared a USD 40.84 million and Rs. 8,548.75 million contract to build a dedicated aviation fuel pipeline from Muthurajawela to Bandaranaike International Airport (BIA), alongside a massive new fuel storage facility with a capacity of 92,000 cubic metres.

Energy Minister Anura Karunatilaka said the project represented a major investment in strengthening the infrastructure underpinning Sri Lanka’s aviation fuel supply and ensuring more reliable fuel availability at the country’s main international airport.

‘This project will provide the infrastructure required to strengthen the reliability and continuity of aviation fuel supplies to Bandaranaike International Airport, Karunatilaka said.

The contract has been awarded to China Petroleum Pipeline Engineering Company Limited, following an international competitive procurement process in which three bids were received.

The project will see a new aviation fuel storage tank complex constructed at Muthurajawela, together with the associated infrastructure required for handling and transferring aviation fuel.

Business

CSE activity up, turnover weak at Rs. 1.4 billion

Published

21 hours ago

2026/10/2

Thilina Walpola

By Hiran H Senewiratne

Trading activity on the Colombo Stock Exchange (CSE) gathered pace yesterday as global fuel prices began to show signs of easing, according to market analysts.In this context, both indices moved upwards. All Share Price Index up by 67.97 points while S and P SL20 up by 8.30 points.

Turnover stood at Rs 1.4 billion with seven crossings. Those crossings were reported in Sampath Bank 1.7 million shares crossed to the tune of Rs 238 million and its share price traded at Rs 140, Access Engineering two million shares crossed to the tune of Rs 159 million and its share price traded at Rs 79.50, LOLC one million shares crossed to the tune of Rs 129 million and its share price traded at Rs 129, HNB 100,000 shares crossed to the tune of Rs 38.4 million and its share price traded at Rs 384, JKH 1.9 million shares crossed to the tune of Rs 35 million and its share price traded at Rs 18.60, Hayleys 100,000 shares crossed to the tune of Rs 22.50 million and its share price traded at Rs 225 and Richard Pieris 847,000 shares crossed to the tune of Rs 22 million and its share price traded at Rs 25.50.

In the retail market top seven companies that have mainly contributed to the turnover were Sampath Bank Rs 114 million (813,000 shares traded), JKH Rs 100 million (5.3 million shares traded) LB Finance Rs 49 million (325,000 shares traded), HNB Finance Rs 30 million (27 million shares traded), HNB Rs 27 million (70000 shares traded), NTB Rs 25 million (82000 shares traded ) and Lanka IOC Rs 21 million (666,000 shares traded). During the day 65 million shares volumes changed hands in 10433 transactions.

The Banking and manufacturing sector counters performed well. In the banking sector Sampath Bank let the market while manufacturing sector especially JKH also significantly performed well. With the fuel revision Land IOC also a significant stock at the floor.

Meanwhile, First Capital Treasuries said that Ramesh Schaffter resigned as a Non-Independent Non-Executive Director with effect from October 1, to facilitate the restructuring of the company’s board.

Yesterday the Central Bank announced the US Dollar rate as against rupee. The rupee was quoted flat at Rs 330.65/80 to the US dollar in the spot market , while bond yields dropped, dealers said.