Sri Lanka’s tariff reforms could leave a bitter aftertaste for the local confectionery industry, with manufacturers warning that cheaper finished imports and heavily taxed production inputs are a recipe for an uneven playing field.
A senior industry source, speaking exclusively to Mirror Business on condition of anonymity, said the sector fully supports the government’s tariff modernisation drive and commitments under the International Monetary Fund (IMF) -backed reform programme.
However, the source stressed that trade liberalisation must not give finished imports an unintended advantage over locally produced goods.
The planned removal of the CESS and Ports and Airports Development Levy (PAL) is expected to make imported confectionery significantly cheaper. Local manufacturers, however, will continue to face duties and levies on essential inputs such as sugar, corn starch, milk powder, cocoa products and flavouring ingredients.
“If para-tariffs on finished confectionery are removed, it is equally important to remove or substantially reduce import duties and the Special Commodity Levy on essential raw materials used by local manufacturers,” the source said.The industry pointed out that manufacturers in countries such as India and China already enjoy lower input, electricity and logistics costs, in addition to considerable economies of scale. This enables them to export finished products at prices that Sri Lankan manufacturers could find difficult to match.
Industry players cautioned that maintaining high levies on production inputs while reducing taxes on competing finished imports would discourage domestic value addition and place investments made over several decades at risk.
“The industry is not seeking protection from competition. It welcomes fair competition. What it seeks is policy consistency that allows domestic manufacturers to compete on equal terms.” Sri Lanka’s confectionery industry directly employs more than 30,000 people across production, sales, distribution and support services, while supporting thousands more in transport, packaging, advertising and retail.
According to data from retail research firm PepperCube, confectionery products are available in about 65 percent of Sri Lanka’s estimated 284,000 fast-moving consumer goods outlets, from supermarkets to small neighbourhood stores.
The sector also contributes billions of rupees annually in taxes and exports to more than 60 countries. By meeting a substantial share of local demand, domestic manufacturers also help reduce the foreign exchange that would otherwise be spent on finished imports. Lowering input levies would
strengthen manufacturers’ competitiveness, encourage new investment, safeguard employment and create greater scope for export expansion.
“A level playing field is not a request for protection. It is a prerequisite for sustainable industrial growth, employment generation, export expansion and long-term economic resilience,” the source said, calling on policymakers to ensure that tariff reform strengthens rather than weakens Sri Lanka’s industrial base.
