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Five-year income tax exemptions for agriculture, livestock, and fisheries sectors

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Budget for next year presented under COVID siege

* Special Tax Appeals Court to resolve tax issues expeditiously

* Rs 500,000 start-up capital loan with 5-year grace period for entrepreneurs

* A sports economy worth USD 1,000 Mn from 2021-2024

* New city universities in each district

* Rs 8 Bn for technology enhancement

* Rs. 250 mn to develop temples in villages

* Extra Rs. 2 per dollar sent by Lankans employed overseas

* Two LNG plants, one coal plant to produce 1,000MW

* Sustainable and renewable energy supply by 2023

* Rs.15 billion for expanding mobile, fixed broadband

* An additional provision of Rs. 20,000 mn for the tri-forces

* Allocation of Rs 750 mn for activities of Rana Viru Seva Authority

* 5.5% economic growth rate for 2021 expected

* 4% budget deficit goal to be achieved by 2025

 

By Saman Indrajith

Prime Minister Mahinda Rajapaksa in his capacity as the Minister of Finance presented the 75th budget of the country, spelling out measures and proposals to achieve poverty alleviation and economic revival.

The budget proposals aimed to support the two year medium term programme of poverty alleviation and economic revival outlined for 2021-2023 in the “Vistas of Prosperity and Splendour’, the Prime Minister said.

“The expected economic growth rate for 2021 is 5.5 percent. I emphasise that it is our medium term vision to reduce the budget gap through increasing the economic growth up to 6% and increasing the government revenue from its current level of 9.7% to 14.1%. By 2025, the budget deficit is expected to be 4% of the GDP due to growth in tax revenue through the expansion of the economy and the trust placed on the management of public expenditure and public enterprises.”

Prime MinisterRajapaksa commenced delivering the budget speech around 1.44 pm. It continued till 4.54 pm including a half-an-hour tea break between 2.43 to 3.24.

Income tax exemptions have been proposed for agriculture, livestock, and fisheries sectors for five years. In addition, a 50% income tax exemption has been proposed for local companies if get listed in the Stock Market before December 31, 2021.

He proposed to establish a special Tax Appeals Court to facilitate the resolution of tax appeals without delays, Prime Minister Rajapaksa said.

“I propose to simplify the Taxes on Capital Gains, where such taxes will be calculated based on the sale price of a property or the assessed value of a property whichever is higher. I propose to exempt the tax on dividends of foreign companies for three years if such dividends are reinvested on expansion of their businesses or in the money or stock market or in Sri Lanka International sovereign bonds.”

The PM also noted that the government intended to bring necessary changes to the Inland Revenue Department (IRD) in order to increase the self-compliance of taxpayers and to strengthen tax audits as well as to increase tax revenues.

The Premier went to propose enforcing necessary legal provisions that enabled the cancellation of private tax consulting services that aid and abet issuance of forged tax reports.

A loan of Rs 500,000 as start-up capital with a grace period of five years would be introduced for entrepreneurs. A commitment fee of 0.25 per cent proposed to be levied from loan applicants to ensure that the funds are managed and utilized accordingly.

Prime Minister Rajapaksa proposed to allocate additional funds of Rs. 3,000 million to initiate a scholarship programme to provide Rs. 4,000 monthly allowance each to students receiving vocational education based on their active participation.

Technical colleges of which the annual intake is presently at 100,000 would be increased to 200,000 students per year, he said. A five-year-grace period for tax levied from Vocational Training Centres, which were able to double their annual intake of students, was proposed. Rs. 10,000 million would be allocated from the budget next year for new technical colleges to be established in Colombo, Kalutara, Kandy, Anuradhapura and Batticaloa. New city universities would be established in each district to cater to students pursuing popular subjects.

The PM proposed to create a sports economy worth USD 1,000 million during the period 2021-2024. For that purpose Rs 1000 million was proposed to be allocated from the budget. He proposed measures to increase female participation in national sports.

It was proposed to increase production of milk to meet local demand and a Rs. 500,000 loan will be provided for purchasing cows and meeting other dairy farm requirements. The Premier said that $300 million in foreign exchange was annually needed for milk imports and proposed to reduce that by $55 million by encouraging local milk production.

Prime Minister Rajapaksa proposed to allocate Rs. 750 million for the welfare of disabled armed forces personnel.

He proposed to allocate additional funds of Rs. 250 million to develop basic infrastructure of temples in rural areas.

The Budget proposes to allocate Rs. 8 billion for technology enhancement next year. In addition, allocation of Rs.15 billion for expanding mobile, fixed broadband under the “Gamata Saniwedanaya’ scheme was proposed. State land would be given to the Telecommunications Regulatory Commission for the proposal, the PM said.

The Prime Minister said that low-income women migrated for work and their remittances had strengthened the national economy. In a bid to increase annual remittances from migrant workers to over US$ 7 billion, he proposed to pay extra two rupees for every dollar sent by Lankans employed overseas. That was in addition to prevailing exchange rates; he said, assuring to implement a contributory pension scheme for Lankan foreign employees.

It was proposed to expedite the construction of the national expressway network and extend the Marine Drive to Moratuwa. Prime Minister Rajapaksa said a three-year programme to develop road infrastructure in the 25 districts would be introduced. Rs 1,300 million proposed to be allocated to improve the railway network including the extending of Colombo and Kelani Valley track.

Electricity consumers were assured of a sustainable and renewable energy supply by 2023.

The PM said that 70 per cent of the country’s energy supply would be obtained from renewable energy sources by 2023. The Lakvijaya and Kerawalapitiya Power Plants would be strengthened to guarantee interruption-free power supply through years 2021-2022. One coal-fired power plant of 300 MW and two LNG plants would set up. The Kerawalapitiya plant would be transformed into an LNG plant, the PM said, proposing to provide solar panels of 5 kilo watts each to 100,000 houses of low income families under an Asian Development Bank and Indian loan scheme. Loan of 4% interest rate would be provided to low income families for this purpose, he said.

Reforms were proposed for the Foreign Service and under the new reforms bilateral agreements would be reviewed to ensure national security and Sri Lanka’s non-aligned stance, the Prime Minister said, adding that under those reforms a new mechanism would be introduced to assess the efficiency and effectiveness of diplomats and foreign service officers.

“With the aim of ensuring national security, a medium term plan to enhance the professional skills of the heroes of our tri-forces, providing them with modern technological facilities is currently being prepared. In the context of resource constraints and identified priorities in the country, further strengthening of the Sri Lanka Navy has been given priority. We must combat the drug menace and must eliminate it to prevent our country becoming a hub for international illicit drug trade. The government expects to ensure that the investments will facilitate to control smuggling of goods, providing the required protection for the fishery resources and fishery communities and establishing a safe environment for carrying out tasks in the Indian Ocean.”

The PM proposed to allocate Rs. 20,000 million as an additional provision for the tri-forces to fulfill the basic requirements identified in the medium-term and long-term planning frameworks in accordance with their basic requirements.

He also proposed to allocate Rs.750 million for the activities implemented by the RanaViru Seva Authority, including the provision of medical aid, support for development enterprises, conducting of educational and vocational development programmes, housing loans and provision of supporting equipment for the disabled war heroes targeting, the retired and disabled war heroes of the tri forces, police and the civil defense force and the dependents of the families of those heroes have laid down their lives.

The Premier proposed an additional allocation of Rs. 2,500 million, to address special programmes aimed at strengthening public security. “The government has given special attention to strengthening the police so as to assure public security. We must consolidate the environment for all citizens to live freely without any fear. Resources will be allocated to support the control of the drug menace, to regulate vehicles and traffic rules, strengthening Tourist police, special training and provide the necessary facilities to prevent crimes and robberies. It is also proposed to expand the police patrols to ensure public safety by deploying special police vehicles.”

Prime Minister Rajapaksa proposed the implementation of a special loan scheme for public servants to obtain solar powered electricity. “When appointing or transferring public servants, it is proposed to ensure that such postings are made giving preference to the districts of residence. Permission will be granted for non-executive office employees of the public service to engage in other jobs or employment after office hours and those who seek foreign employment will be granted leave for two years. I propose to reduce the maximum interest charged on housing and property loans of public servants granted by banks under housing loans and advances up to a maximum of 7 per cent.”

The PM said: “The estimated Government Revenue for 2021 is Rs. 1,961 billion. The total Government expenditure is Rs. 3,525 billion and as such the difference between the revenue and the expenditure is Rs. 1,564 billion. It is planned to maintain the budget gap at 9 percent of the GDP since the private investments which amounted to 32.3 percent of the GDP in 2014 has decreased up to 27.6 percent in 2019 and since it is required to provide a robust start by the government to revive the economic growth which had stagnated recently.”

The second reading debate of the budget is scheduled to commence today (18) and continue till Nov 21. The vote on the second reading will take place at 5 pm on Nov 21. Parliament sittings will be held from the 18th to the 20th from 9.30 am to 5.30 pm. The debate of the Committee Stage will commence on Nov 23 and is scheduled to conclude on Dec 10. The final vote on the budget is scheduled to be taken at 5.00 pm on Dec 10.



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Wide ranging rackets benefiting CEB engineers

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By Ifham Nizam

The Ceylon Electricity Board implements most of its power transmission and distribution infrastructure development projects like the construction of new transmission lines, transmission and distribution substations, etc., using loan funds obtained from international lending agencies such as the Asian Development Bank (ADB) and Japan International Cooperation Agency (JICA).

These “concessionary” loans are guaranteed by the government, and projects funded by those loan packages are implemented through specially set up project management units (PMUs).

Engineers attached to PMUs are given special facilities and monetary incentives on the understanding that they will work outside normal working hours and weekends to complete their projects on time and within the allocated budget.CEB often justifies these projects for priority financing citing “great national importance” and the critical needs to improve the power transmission and distribution infrastructure of the country.

Almost all of these project titles carry the words like “green energy”, “clean energy”, “green power”, etc., signifying these investments are primarily aimed at using renewable energy.

However, according to a senior official of the Ministry of Power & Energy, these projects are seldom completed within the given time period or budget. Because of this reason not only the expected benefits of these investments are often lost to the country, but the government incurs heavy losses by way of commitment fees paid to lending agencies.

Once project funds are committed through a loan agreement, the government has to pay this fee to the lending agency, generally computed as a percentage of the loan amount or the “commitment amount”. It is a significant burden to the government, especially in a situation where there is a severe shortage of foreign currency.

If the loan funds are disbursed within the original term of the loan, this “front end fee” is charged at a lower percentage. Hence, when CEB does not complete projects in time, the government ends up paying a higher commitment fee, and is also forced to seek an extension to the original loan disbursement period, thus incurring further costs.

Even more disturbing than long delays in project completion is that some completed projects have turned out to be wasteful investments of foreign funds given to the country.It is understood that the former CEB Chairman M. M. C. Ferdinando had questioned why the new 132kV transmission line between Ambalangoda and Galle, which was completed in 2017 at a cost of Rs. 1,500 million, remained unserviceable to date.

The Sunday Island understands that CEB’s System Control Center is able to switch on this transmission line only when the Samanalawewa Hydropower Plant is running at full capacity.This project had been billed by CEB’s transmission planners as a high-priority investment and solution for the serious transmission bottlenecks in the southern network of the country. Southern areas had been experiencing serious transmission capacity restrictions for decades.It is understood that the CEB General Manager has responded to the Chairman’s inquiry by stating that the commissioning of several new transmission lines that are presently under construction would make the Ambalangoda-Galle transmission line operational.

The 220kV transmission line from Pannipitiya to Polpitiya via Padukka is another example of a costly planning blunder by the CEB. Construction of this long transmission line commenced in 2015 but was delayed owing to many problems, including public protests and court cases filed by some landowners.However, when this ADB-funded project was eventually completed in late 2021 (after a delay of over five years), it has been discovered the power flows in the wrong direction when the line is switched on, causing overloading of the Pannipitiya substation.Hence, this transmission line also remains idle presently. It is understood that CEB planners have explained that power would flow in the right direction once several other transmission lines (being constructed under different loan packages, and already delayed by many years) are completed.

The then CEB General Manager taking part in a national television discussion following the countrywide power outage on August 17, 2020, explained that the unavailability of this critical transmission line was a major contributing factor to CEB’s inability to restore supply for many hours.Another example of colossal waste of funds is the transmission substation at Kappalthurai in the eastern province that has cost the country over Rs. 2,500 million of ADB loan funds. Since there is no high demand for electricity or no future growth in demand in the area, this installation will be idle for the foreseeable future.

According to CEB employees, the existing Trincomalee substation, which is situated about 11 km from this new substation, has ample capacity to serve the electricity demand in the area for many years to come. In the meantime, CEB has made a large investment in increasing the capacity of the Trincomalee substation as well.It is also understood that CEB’s Projects Division has been maintaining several non-functional PMUs for years, spending large sums of money on rented project offices and large project staff, even when no funding has been secured for relevant projects.

CEB employees complain that project directors and their engineers attached to these “white elephants” are allowed to enjoy all benefits, including project allowance (an additional amount equal to one-third of monthly salary) and luxury SUVs because most of them hold important positions in the powerful CEB engineers’ union.They claim that the CEB management never holds to account any project manager responsible for long delays, but they are allowed to continue to enjoy all the perks. According to a senior engineer who works as a consultant on project-related work, this guarantee of “job security” acts as a strong incentive for the project engineers to prolong their projects.CEB employees believe another reason for this lackadaisical attitude of CEB top management is that foreign-funded projects have long been a steady source of luxury vehicles for CEB engineers.

Most vehicles used by top CEB engineers including the General Manager have been provided under different foreign-funded projects, as the existing government guidelines will not allow the purchase of such high-end SUVs having large engine capacity including premium European makes like Audi and Mercedes Benz for government officials.CEB employees complain that the Ministry of Power & Energy generally turns a blind eye to these irregularities mainly because the majority of project managers and their project engineers are top officials of the powerful engineers’ union.

They allege that even the Public Utilities Commission of Sri Lanka (PUCSL,) which has the legal obligation to ensure CEB will not make unnecessary or wasteful investments in its transmission infrastructure, has never questioned CEB regarding assets that are idling for many years after spending billions of rupees of public money.

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Gota leaves Singapore after fleeing protesters at home

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(AFP) Former Sri Lankan president Gotabaya Rajapaksa on Thursday left Singapore where he had taken refuge following his escape from protesters at home, after he was given a visa only for about a month in the city-state.Rajapaksa flew into Singapore from the Maldives on July 14 after fleeing a deepening economic crisis and widespread protests in Sri Lanka. He tendered his resignation shortly after his arrival.Sri Lankans arriving in Singapore normally receive a 30-day visa, but authorities said they had initially given Rajapaksa only two weeks and later extended the visa by another two weeks.

“The Immigration & Checkpoints Authority (ICA) confirms that Mr Gotabaya Rajapaksa left Singapore on 11 August,” Singapore’s immigration office said in reply to an AFP query.

It did not say where the former leader was headed but the Thai foreign ministry, as well as a source in Colombo, said Wednesday he was seeking a new safe haven in Thailand.Rajapaksa fled his nation after tens of thousands of protesters overran his official residence last month angry about acute shortages of food, fuel and medicine endured by Sri Lanka’s 22 million people since late last year.An international human rights group last month formally asked Singapore to indict Rajapaksa for crimes against humanity during his country’s decades-long civil war that ended in 2009.

The South Africa-based International Truth and Justice Project said it had urged Singapore to exercise universal jurisdiction to arrest the former president for grave breaches of international humanitarian law.Rajapaksa helmed Sri Lanka’s defence ministry while his brother Mahinda was president when the country’s brutal Tamil separatist conflict came to a bloody end.Singapore’s Attorney-General’s Chambers confirmed it had received a complaint from the rights group without giving details.

“His Singapore visa runs out on Thursday,” a close associate of Rajapaksa told AFP in Colombo on Wednesday.

“He had applied for an extension, but it had not come through as of Wednesday morning.”

The source said Rajapaksa now planned to go to Thailand for a short stay but return to Singapore.The Thai foreign ministry confirmed it had received a request from Colombo for the 73-year-old deposed leader to visit and an assurance that he would not seek political asylum.

“The Thai side received a request for the former president to enter Thailand from the current government of Sri Lanka,” ministry spokesman Tanee Sangrat said in a statement.

“The stay is temporary in nature with the aim of onward travel. No political asylum has been sought.”

The Rajapaksa confidant told AFP that the former leader was keen to return home as protests against his administration had fizzled out, but his successor Ranil Wickremesinghe had advised him against an early return.Singapore officials had said he was on a private visit to the city-state and the foreign minister stressed that he was not given any special privileges.

“In general, the Singapore government does not accord privileges, immunity and hospitality to former heads of state or heads of government,” Singapore Foreign Minister Vivian Balakrishnan said in a written reply to a question in parliament last week.

“Consequently, former president Gotabaya Rajapaksa was not accorded any privileges, immunity or hospitality.”

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Harsha won’t join cabinet, but urges All Party Govt. to implement his economic recovery plan

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Samagi Jana Balavegaya (SJB) MP Dr. Harsha de Silva Friday (12) requested for the support of all political parties represented in Parliament for what he called a short-term programme meant to revive the national economy.The MP said so after submitting his set of proposals to the Parliament. The former non-cabinet ranker who served the previous UNP government said that he prepared the proposals in consultations with academics, specialists, professionals, politicians and ordinary people.

Declaring that he wouldn’t join the government under any circumstances, the economist assured his support to President Ranil Wickremesinghe’s government through Parliament.Expressing confidence his proposals could secure the backing of external powers, the Colombo District lawmaker said that he received the blessings of Opposition political parties in this regard.

Lawmaker de Silva said that once the government took measures required to remedy the national economy the country could go for general election.The top SJB spokesperson said that Wickremesinghe’s all-party-government could adopt his proposals. Urging leaders of all political parties to support his initiative, the former UNPer said that depending on their support the administration could with the support of the public here and foreign governments overcome the daunting economic challenges. MP de Silva said that there was no point in his accepting a cabinet portfolio. The current crisis couldn’t be addressed by dispensing ministerial portfolios (SF)

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