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Sri Lanka’s coconut industry in crisis
Corruption and labour shortages are among the causes, but the latest challenge comes from President Ranil Wickremesinghe's budget proposal to increase VAT by 18 per cent. For some observers, the sector is on the verge of collapse.
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Colombo (AsiaNews) – Sri Lanka's coconut industry is facing a major crisis due to several factors: corruption, high taxes, problems related to fertilisers, and disease, as well as the lack of government assistance in reaching the global market.
Once a thriving industry according to experts, it is facing a decline in production and productivity in part for lack of state subsidies, but also labour shortages. As a result, smallholders, who make up 69 per cent of crop production, are giving up.
“The latest in a series of blows came with President Ranil Wickremesinghe's 2024 budget proposal to increase VAT by 18 per cent on coconut products," farmers Mayantha Sirimanne and Nilushika Ratnayaka told AsiaNews.
“This would further increase prices by making the product less and less competitive. Many farmers are dividing up their land to put it up for sale, and some say the collapse of the sector is imminent."
“We recently participated in an auction by the Coconut Development Authority," the farmers explained. "Instead of the hectic atmosphere typical of an auction, we saw a handful of brokers and sellers bidding amid normal chatter. There was no real call for bidding.”
Some brokers note that "auction prices are not a real reflection of the available stock, because only about 1 per cent of the coconuts produced are sold at auction. This indicates that the industry is controlled by middlemen, who determine wholesale prices, which are currently down to about 45 rupees, about ten less than retail."
“At a recent hearing of the Committee on Public Enterprises, it was revealed that the online auction system introduced to demolish 'mafia' monopolies was opposed and hindered by brokers who wanted to maintain their interests,” said economic analyst Navin Punchihewa speaking to AsiaNews.
“CDA officials have long kept the system inactive by colluding with intermediaries, despite the law requiring state-owned enterprises to sell their products at a public auction,” Punchihewa explained.
“However, during the tenure of a former plantation minister accused of tampering with prices, corruption flourished. This minister allegedly sold the harvest of the Chilaw plantations through a private auction, bypassing the CDA.”
With demand for coconuts up both at home and abroad, the country is facing production challenges, this according to Desiccated Coconut Millers’ Association Chairman Neomal Perera. “The lack of coconuts is the main issue and there is an issue with the research, as well as exports to the US and the EU,” noted Perera, who is also involved in exporting coconuts.
“The Coconut Research Institute and the Coconut Cultivation Board have given wrong information at the beginning of the year to the Central Bank, saying there is a crop of around 3.3 billion coconuts, when there is only a crop of 2.6-2.7 billion,” Neomal explained. Thus, “This year the industry suffered because we were unable to get a proper price from overseas buyers.”
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05/04/2023 13:50
