The Sri Lankan government has decided to exempt the taxes on imported rice with immediate effect to arrest the escalation of prices in the domestic market that were pushing up food costs of the poor and restricted supply, allowing large millers to control the market and earn excess profits. A so-called special commodity levy on imported rice has been brought down to 05 rupees a kilo for raw, nadu and samba from January 27, from 15 rupees a kilo, the finance ministry said. The 15 rupees tax had been effective from January 17. The Ministry of Finance said the measure was taken to prevent the general public from facing difficulties due to the increase in prices of rice. The government had earlier decided to completely remove the 50 rupee import levy, the Value Added Tax of 15 percent, the 7.5 percent customs duty and the 2 percent Nation Building Tax on rice.
Sri Lanka taxed all types of imported rice at 30 percent or 50 rupees a kilo up to 2016, keeping rice prices above other countries in Asia. Internationally traded rice is around 50000 rupees per ton (330 USD/ton) to 57000 rupees per ton (380 USD/ton) a tonne, not counting freight and other port charges by December 2016. In Sri Lanka a powerful farming a milling lobby keeps rice prices high with the help of government import taxes, restricting the economic freedoms of the poor and hungry. To force people to eat expensive rice, and give large profits to wheat mills taxes on wheat flour is also kept high, while raw wheat is allowed in barely taxed. Sri Lanka Maha paddy crop this year is expected to be down by around two million tonnes following a drought in 2016.
The government recently instructed the Cooperatives Wholesale Establishment (CWE) under Ministry of Industry and Commerce to buy 20,000 Metric Tonnes (MT) of paddy (both White rice and Nadu) from the Paddy Marketing Board immediately and release the paddy to millers. The government also has decided to import 10,000 MT of rice.