ISSN: 1391 - 0531
Sunday March 23, 2008
Vol. 42 - No 43
Financial Times  

Coconut output seen falling sharply

By Bandula Sirimanna

The country’s coconut export industry is currently facing a crisis due to shortage of coconuts and major exporters say that they have incurred a loss of Rs. 1.5 billion in foreign exchange during the January-March period.

Senior members of the Coconut Products Traders Association said that export of coconut products has come to a standstill and they are on the verge of losing international market share. They have suggested to the government to reduce taxes on edible oil imported to the country as surplus coconuts available presently are being channeled only for coconut oil production at the expense of the export industries and the coconut oil industry is heavily protected by these tariff barriers of 28% import duty, a surcharge of 15% on duty, 15% VAT, and Cess at Rs. 6,000 per metric ton on edible oil imports. Addressing a media conference in Colombo, Chairman Coconut Products Traders Association, Taraka Dadagamuwa said that the government should implement the tax reduction on edible oil at least till the end of this year to protect the coconut export industry. He added that refined coconut oil can be imported at a price of Rs. 175,000 per metric ton and palm oil can be imported at a price of Rs. 155,000 per metric ton if the taxes are removed. He believes the price of locally produced coconut oil could be brought down to Rs. 175,000 per metric ton and the price of coconut will be around Rs.22 per nut.

He pointed out that the problem of a dismal crop has definitely set off a chain of crises to a host of value adding and employment generating coconut-related industries in addition to making coconuts a luxury for poor households.

What policy makers appear to be ignorant about is that coconut is not purely a domestic industry but an integral part of a crucial and value adding export sector such as desiccated coconut, activated carbon, coir fibre products etc. Their input costs have gone up considerably thereby reducing Lankan exports competitiveness, he said.

President of the Sri Lanka DC Millers Association, Felix Fernandopulle noted that the work at 62 DC Mills in the island has come to a standstill owing to insufficient coconuts to keep mills running. At least 10,000 employees in the DC industry are facing severe hardships and could lose their jobs. He attributed this situation to the increase in edible oil duty by the government from 10 to 28 percent with effect from January 1 this year in midst of the off season. Chairman of the Coconut Development Authority D.J.U Purasinghe told The Sunday Times FT that he has made a proposal to the Ministry of Plantation Industry to reduce taxes on edible oil imported to the country and a cabinet paper has also been prepared accordingly.

He disclosed that a final decision on this matter will be taken at a meeting with Minister D.M Jayaratne scheduled for next week. He noted that stringent laws would also be introduced to prevent large scale fragmentation and selling of coconut estates which has seriously affect the development of coconut industry. He said a 50 year old coconut tree would be worth around Rs 35,000 and it is envisaged to impose heavy penalties on felling coconut trees that are more than 50 years old to prevent the indiscriminate felling of mature coconut trees. The government banned raw nut exports for a short period and also allowed the import of 30,000 MT of copra for coconut oil mills and duty free import of coconut oil. This was to prevent nut prices from rising even higher and also to ensure an adequate supply of nuts for both the DC mills and oil mills he said. Purasinghe noted that the CDA has made another proposal to the Ministry of Plantation Industries to import 30,000 metric tons of copra till the end of February and to import coconut oil at zero duty to save the industry which has invested five billion rupees for its sustenance. He added that the Ministry has given an assurance to consider these proposals favourably. Purasinghe disclosed that this year’s coconut production will fall sharply to around 2770 million nuts although the demand is four billion nuts.

This prediction was made by the Coconut Research Institute, he said. Sri Lanka exports DC mainly to European Union, Finland, Turkey, Egypt, UAE and Brazil.


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