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Asian Tribune is published by World Institute For Asian Studies|Powered by WIAS Vol. 12 No. 2399

Coconut growers urge VAT on marketing oil and copra removed

By Quintus Perera – Asian Tribune

The Coconut Growers Association of Sri Lanka (CGASL) representing growers of one of the major financial crops has written to the Treasury to remove VAT currently imposed on marketing coconut oil and copra because of the dclining price of Rs 9 per coconut prevailing in the market now due to glut in production indicating that this the finest chance to revive the dying coconut oil production. CGASL points out that today less than 10 percent of the potential capacity of the coconut oil production is in operation.

They request the same facilities offered for the desiccated coconut exports should also offered to the coconut oil production and copra production.

In a communication addressed to the Secretary to the Treasury, J V R Dias, President, CGASL indicated that in the recent Colombo Auction the price per coconut fetched was Rs 9 and the price the small holder would receive then would be Rs 8. But the today the cost of production per nut too is Rs 8 the coconut production is not sufficiently remunerative, unless the farm gate price should be maintained at Rs 11 the minimum.

The CGASL points out that the majority of oil mills that are not functioning at present have a manufacturing capacity of around 3 tons of coconut oil per day by processing 25,000 nuts and with 300 working days per annum 900 MT oil could be produced. Average 50 acres farm could produce 200,000 nuts per annum which gives a yield of 25 tons of oil worth Rs 2.5 million.

As the 2006 nut harvest is expected to be around 3,000 million nuts compared to 2,500 million during 2004 and 2005, rather than depending only on desiccated coconut exports, the coconut oil and copra production should be revived by offering same facilities offered to DC production, CGASL points out.

The only significant item pertaining to production cost of oil on which input VAT can be claimed is electricity. For the production of rupees one million worth of coconut oil, the electricity consumable could roughly be estimated at Rs 75,000. The VAT payable by the mill to CEB will be approximately Rs 11,250 as against a total Vat of Rs 150,000 payable on the sale of rupees one million worth of coconut oil.

Unless the VAT is removed and the oil mills are reactivated, there will be a repetition of the debacle that occurred during the year 2,000 when the annual coconut production reached 3050 million nuts and the farm gate price plummeted to Rs 3.50. In that year, by exporting a record 89,000 MT of DC foreign exchange earned was US $ 67 while due to the non-functioning of coconut oil mills, the country imported 90,000 Mt of edible oil equivalent to 720 million nuts.

- Asian Tribune -

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