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

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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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Inflation curbed by govt. fuel subsidy introduction and surcharge on vehicle import tax – CBSL Governor

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CBSL Governor Dr. Nandalal Weerasinghe

By Hiran H. Senewiratne

The government’s decision to introduce the fuel subsidy and the surcharge on the vehicle import tax helped curb inflation to a great extent, Central Bank Governor Dr. Nandalal Weerasinghe said.

‘The government this week approved a Rs. 40 billion fuel subsidy for the next three months on top of Rs. 57 billion provided from April-June, Governor Weerasinghe told the media yesterday at the Central Bank head office in Colombo at the CBSL’s monthly monetary policy review meeting.

‘If not for fuel subsidy and surcharge on the vehicle import tax, the inflation would have been higher than the current level, the Governor said.

‘There could have been higher imports and reserve building up would have been difficult. Inflation has risen beyond the Central Bank’s upper band of 7 percent since July, he said.

‘The country’s inflation hit a 37-month high of 8 percent in August after the government raised fuel prices more than 50 percent following the Middle Eastern escalation by end February, Dr Weerasinghe said.

The Central Bank’s inflation target for the past three years have been 5 percent with lower band of 3 percent and higher band of 7 percent, Governor said.

The Governor added: ‘The government provided Rs.57 billion as a fuel subsidy mainly for diesel. The latest Rs.41 billion has been allocated only for diesel as it is used for public transport.

‘The government also imposed a temporary 50 percent surcharge on Customs Import Duty on new personal vehicles on May 16 and has extended it until December 31, a move that will help to prevent outflow of foreign currency.

‘The Central Bank also tightened the monetary policy in May, raising the key monetary policy rate by 100 basis points, to curb excess demand in the economy to control demand-driven inflation.’

Meanwhile, head of the CBSL’s Economic Research Department L.R.C. Pathberiya said, ‘Credit growth has slowed to 24.5 percent year on year in August from a higher level of 30 percent a few months ago, after the Central Bank’s monetary policy tightening in May.

‘However, the Central Bank is optimistic about the current credit growth, he explained.

Pathberiya added: ‘The credit to the private sector from commercial banks has slowed, but we believe it is sufficient for economic growth.

‘The nation’s economic growth slowed to 4.2 percent year-on-year, its lowest in 11 quarters’’.

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PM warns Sri Lanka’s waste crisis is a ‘disaster waiting to happen’

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The third ICPIES being addressed by Prime Minister Dr. Harini Amarasuriya.

By Ifham Nizam

Prime Minister Dr. Harini Amarasuriya warned that Sri Lanka’s worsening waste-management crisis, particularly the uncontrolled accumulation of plastic waste and poorly managed landfills, was a “disaster waiting to happen”, urging scientists, researchers and policymakers to help the government find practical solutions before the problem reaches a critical point.

Addressing the launching of the Open University of Sri Lanka organized, ‘International Conference on Plastics, Innovations and Environmental Sustainability’ (ICPIES 2026) as Chief Guest, at the Cinnamon Lakeside Hotel yesterday she said waste management, waste reduction and recycling had become national priorities, with the government placing greater emphasis on the issue in its preparations for the 2027 Budget.

‘This is becoming a critical issue and something that, at any moment, if we don’t manage it properly, could become a huge disaster. It’s a disaster waiting to happen, Dr. Amarasuriya said.

She said unregulated and poorly managed landfills, particularly in and around Colombo, posed serious environmental and public risks, while increasing urbanisation was extending the waste-management challenge beyond the capital to other parts of the country.

‘As a member of Parliament for the Colombo District, I can tell you that one of the biggest challenges we are facing is waste management and actually managing the recycling of waste, and particularly of plastic products. This is something that we are battling every day, she said.

The Prime Minister said the government could not regard economic development as meaningful if it came at the expense of the country’s environment and natural resources.

‘If we are to speak of a beautiful life, we must first ensure that the air we breathe, the water we drink, the soil on which we live, the food we eat is clean and secure, she said.

She pointed to the scale of the global plastics crisis, noting that around 400 million tonnes of plastic waste are generated worldwide each year, while between 19 and 23 million metric tonnes of plastic waste enter natural ecosystems annually.

Plastic waste eventually breaks down into microplastics, which can enter aquatic organisms and subsequently the human food chain, she said.

Dr. Amarasuriya also linked plastic consumption and environmental degradation to the wider climate crisis, warning that the consequences of climate change were already being experienced by communities around the world.

She referred to devastating floods and landslides in the Himalayan region and said the impacts of climate change demonstrated that environmental damage could have consequences far beyond national boundaries.

Coastal clean-up projects and other waste-separation and recycling initiatives are also being implemented, while the government is working with the Western Provincial Council on a refuse-derived fuel project at Karadiyana.

The third ICPIES, held under the theme “Eco-Driven Innovations,” brings together researchers, policymakers, industry representatives and other stakeholders to examine plastic pollution, microplastics, circular-economy approaches, waste-management policy, technological innovation, artificial intelligence and smart environmental monitoring. The conference ends today.

Senior Professor P. M. C. Thilakarathne, Vice Chancellor of the Open University of Sri Lanka, was the Guest of Honour.

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Mention of possible future inflation dampens investor appetite

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By Hiran H. Senewiratne

Stock investors were worried yesterday following Central Bank Governor Dr. Nandalal Weerasinghe’s mention at the CBSL monthly monetary policy review meet of possible future inflation pressures that may impact the economy.

The All Share Price Index went down by 4.89 points, while the S and P SL20 rose by 16.1 points. Turnover stood at Rs 1.55 billion with four crossings.

Those crossings were; Access Engineering crossed 1.5 million shares to the tune of Rs 119.8 million; its shares traded at Rs 79.60, Sampath Bank 450,000 shares crossed tfor Rs 63 million; its shares sold at Rs 140, Sunshine Holdings 750,000 shares crossed to the tune of Rs 21.4 million; its shares traded at Rs 28.50 and Softlogic Life 290,000 shares crossed for Rs 20.4 million; its shares sold at Rs 70.40.

In the retail market companies that mainly contributed to the turnover were: Access Engineering Rs 150 million (1.9 million shares traded), JKH Rs 113 million (six million shares traded), Softlogic Life Rs 80 million (one million shares traded), Softlogic Capital Rs 64.7 million (6.7 million shares traded), Lanka Realty Rs 64.3 million (1.3 million shares traded), Colombo Dockyard Rs 53.7 million (452,000 shares traded) and Sierra Cables Rs 50 million (1.43 million shares traded). During the day 58.9 million share volumes changed hands in 13536 transactions.

It is said that mixed market reactions were noted especially in manufacturing while banking, insurance and FMCG sectors performed well. Further, construction sector counters, especially Access Engineering, and banking sector counters, especially Sampath Bank, performed well.

People’s Leasing & Finance PLC announced its allotment basis for 100 million listed debentures it issued to raise Rs 10 billion, after receiving applications for the full amount.

Yesterday the rupee was quoted at Rs 330.68/75 to the US dollar in the spot market from Rs 330.70/90 the previous day, while bond yields were quoted steady to lower, dealers said.

An auction of Rs 80,000 million Treasury bills was ongoing.

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