In the backdrop of an ongoing financial crisis and rising recession around the globe, the world saw the highest-ever decline in oil and gas prices. It was therefore a surprise that the Sri Lankan Government further increased an excise duty on gas imports to Rs.27.50 per kilogram with effect from February 28th 2009 when a number of export-oriented industries were hoping that the Government would withdraw its earlier tax on gas which was Rs.8 per kilogram.
“As an industry which accounts for USD42 million exports per year, we were hoping that we could be able to regain our losses and stabilize our sales due to the fall in oil prices. But now with these additional taxes on gas we will find it hard to survive since we consume approximately 1,170 Metric tonnes of Liquid Petroleum Gas per month” the President of the Sri Lanka Ceramics Council, Mr. Dayasiri Warnakulasooriya said. He went onto explain that the Rs.8 per kilo excise duty resulted in an impact of Rs. 9.36 million per month on the industry while a further Rs.27.50 per kilo will add an extra burden of Rs.32.17 million to the ceramics industry.
Mr. Warnakulasooriya urged the government to take immediate action to exempt the ceramics industry from these additional taxes while maintaining the energy costs for the ceramic industry on par with the world market prices. “This would, to a certain extent, prevent the ceramics industry from collapsing during these difficult times” Mr. Warnakulasooriya while added highlighting the fact that competitors in the global markets have their own Liquid Petroleum Gas (LPG) and Liquid Natural Gas (LNG) resources and government subsidies while the industry in Sri Lanka does not such benefits.
Speaking to the media at a special conference the Chairman of Royal Fernwood Porcelain Ltd., Jagath Peiris said that “especially if you take the ceramic industry in Sri Lanka we have lots of competitors in the global market such as China, Thailand, Malaysia, Indonesia and Bangladesh. So we have to fight very hard. And to set up a Ceramic company we need at least Rs.1.2 billion. For that we have to borrow from banks on long term loans.
On the other hand we need lots of working capital. This new tax will increase the cost of LP Gas by as much as 32% and it is unbearable to any industry. We recently cut down our workforce from 500 to 450.We are unable to find adequate funds”. It should be noted that Royal Fernwood Porcelain Limited has the capacity to produce 600,000 pieces of porcelain tableware every month but currently operates at only 50% of the capacity due to an increase in the cost of production.
Dr. Bandula Perera, one of the Directors of The Piramal Glass Ceylon PLC (former Ceylon Glass Company Ltd.) was in the view that the Indian based investors of the company set up a new furnace plant facility in 2007 bringing up Rs.4 billion investment to the country with latest technology in South Asia in 2007, though due to high cost of production, the company made the highest loss in last year for the first time in its history. “Even the demand for Arrack bottle has come down in local market so we definitely have to target export markets.
If you reduce your capacity you will lose your profits” He stressed that policy makers and relevant government authorities should focus their attention on this issue since they have to compete in world market place with international prices. “If government wants to raise its tax revenue with this kind of a imposition the authorities should realize that if our production cost increases, it will result in low demand for our products in the international markets. And as a consequence it will further bring down our profits” he said adding that it will result in a decrease of Government’s Value Added Tax (VAT) revenue. “Not only that we will have to shut down our operations and that will leave our employees and their families creating unemployment” he concluded. The officials of the ceramics industry also requested to bring down the artificial higher value of the rupee that has been created by the artificial inflation rate. “We need lots of working capital and we are unable to get a higher return due to the current exchange rate of the rupee to meet our production costs” said Mr. Jagath Silva.
Managing Director, S.H.B. Karunaratne of Art Decoration International said that their company would be able to gain 300% return on investment if they diversify into Bangladesh where there are no higher energy costs involved -such as electricity, gas and oil. More recently Dankotuwa Porcelain said it had lost a big American customer, Crate and Barrel, a chain of American retail stores, to which it had been supplying products for ten years.
“As an industry which accounts for USD42 million exports per year, we were hoping that we could be able to regain our losses and stabilize our sales due to the fall in oil prices. But now with these additional taxes on gas we will find it hard to survive since we consume approximately 1,170 Metric tonnes of Liquid Petroleum Gas per month” the President of the Sri Lanka Ceramics Council, Mr. Dayasiri Warnakulasooriya said. He went onto explain that the Rs.8 per kilo excise duty resulted in an impact of Rs. 9.36 million per month on the industry while a further Rs.27.50 per kilo will add an extra burden of Rs.32.17 million to the ceramics industry.
Mr. Warnakulasooriya urged the government to take immediate action to exempt the ceramics industry from these additional taxes while maintaining the energy costs for the ceramic industry on par with the world market prices. “This would, to a certain extent, prevent the ceramics industry from collapsing during these difficult times” Mr. Warnakulasooriya while added highlighting the fact that competitors in the global markets have their own Liquid Petroleum Gas (LPG) and Liquid Natural Gas (LNG) resources and government subsidies while the industry in Sri Lanka does not such benefits.
Speaking to the media at a special conference the Chairman of Royal Fernwood Porcelain Ltd., Jagath Peiris said that “especially if you take the ceramic industry in Sri Lanka we have lots of competitors in the global market such as China, Thailand, Malaysia, Indonesia and Bangladesh. So we have to fight very hard. And to set up a Ceramic company we need at least Rs.1.2 billion. For that we have to borrow from banks on long term loans.
On the other hand we need lots of working capital. This new tax will increase the cost of LP Gas by as much as 32% and it is unbearable to any industry. We recently cut down our workforce from 500 to 450.We are unable to find adequate funds”. It should be noted that Royal Fernwood Porcelain Limited has the capacity to produce 600,000 pieces of porcelain tableware every month but currently operates at only 50% of the capacity due to an increase in the cost of production.
Dr. Bandula Perera, one of the Directors of The Piramal Glass Ceylon PLC (former Ceylon Glass Company Ltd.) was in the view that the Indian based investors of the company set up a new furnace plant facility in 2007 bringing up Rs.4 billion investment to the country with latest technology in South Asia in 2007, though due to high cost of production, the company made the highest loss in last year for the first time in its history. “Even the demand for Arrack bottle has come down in local market so we definitely have to target export markets.
If you reduce your capacity you will lose your profits” He stressed that policy makers and relevant government authorities should focus their attention on this issue since they have to compete in world market place with international prices. “If government wants to raise its tax revenue with this kind of a imposition the authorities should realize that if our production cost increases, it will result in low demand for our products in the international markets. And as a consequence it will further bring down our profits” he said adding that it will result in a decrease of Government’s Value Added Tax (VAT) revenue. “Not only that we will have to shut down our operations and that will leave our employees and their families creating unemployment” he concluded. The officials of the ceramics industry also requested to bring down the artificial higher value of the rupee that has been created by the artificial inflation rate. “We need lots of working capital and we are unable to get a higher return due to the current exchange rate of the rupee to meet our production costs” said Mr. Jagath Silva.
Managing Director, S.H.B. Karunaratne of Art Decoration International said that their company would be able to gain 300% return on investment if they diversify into Bangladesh where there are no higher energy costs involved -such as electricity, gas and oil. More recently Dankotuwa Porcelain said it had lost a big American customer, Crate and Barrel, a chain of American retail stores, to which it had been supplying products for ten years.
Resource: Increase in Gas tax shakes fragile ceramics industry
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