There Was No Sugar Scam – Lasantha Alagiyawanna
By Saman Priyankara Nammunige
The Government recently came under fire after sugar taxes were cut to Rs 25 from Rs 50 per kg when one trader in particular had allegedly imported a large stock of sugar and sold them above the cleared price, allegedly causing the State a loss of Rs 15.9 billion.
However, while the Opposition alleges that this is similar to Central Bank Treasury bonds fraud, the Government is maintaining that a sugar scam did not take place. In this backdrop, Lasantha Alagiyawanna, State Minister of Co-operative Services, Marketing Development and Consumer Protection says he will hold himself accountable for his words and take responsibility for the statements he has made that a sugar swindle has not taken place.
Following are the excerpts of the interview:
Allegations are levelled against the Government that it should be responsible for a sugar swindle happened recently. How do you explain this situation?
A: First, we have to define what a swindle is. Many parties and people are discussing these days about a so- called sugar swindle. Some say that a loss of Rs 15 billion has taken place because the Government created the avenue for businessmen who supported them to earn unfair profit by reducing import tax on sugar.
Reducing taxes is not an alien thing, in Sri Lankan history. Every Government reduces taxes to increase the State income, as well as encouraging importers and giving relief to the consumers.
In the last week of October in 2020, 1 kg of sugar was priced between Rs 140 and Rs 147 while dhal and canned fish were priced at Rs 300. The public were wilting under those economic burdens. Their lives were at risk due to COVID-19. They couldn’t bear the economic burdens in such situation. That is why the Government decided to amend taxes. We even reduced VAT from 15 per cent to 8 per cent. Because of that, the Government had to endure a loss of Rs 130 billion. In addition, as a result of price reduction of dhal and canned fish the Government had to bear those losses. That was intentional. We did it because we wanted to give some relief to the public.
But it is said the public did not receive relief as they expected. Do you accept that fact?
A: As I said before, the honest intention of the Government was giving a relief to the consumers. However, I accept that the consumers did not receive the entire relief (100 per cent) as we expected. However, they did receive a relief of about 60 – 65 per cent. If the tax of Rs 50 on sugar remained unchanged, the price of 1kg of sugar would have been
Rs 150 by now. Nevertheless, 1kg of sugar is priced Rs 110 these days.
According to the tax amendment, 1kg of sugar should originally be reduced by about Rs 49. At this moment price of 1kg of sugar has been reduced by Rs 40. Therefore, the consumers have lost a relief about Rs 10. Since 13 October 2020 to 7 March 2021, 286,814 MT of sugar has been imported. Therefore, the Government had to endure Rs 14.2 billion loss.
So, is it a lie then, that a loss of Rs 15.9B has been suffered by the State resulting from this tax reduction?
A: Yes. It is a simple calculation. 286,814 MT of sugar was imported. That is 286,814,000 kg (286,814* 1000). This amount should be multiplied by Rs 49.75 because
Rs 0.25 was reduced from a previous tax of Rs 50. Like this, the importers have earned a profit of Rs 5.91B while the consumers have received a relief of Rs 8.36B. The importers have spent Rs 26.3B to earn that profit.
Why can’t the Government directly import essential goods to avoid these types of allegations?
A: Government’s capacity is limited for that. Private sector is more capable and effective to do imports. That is why a tax relief is given to the private sector.
In this case, the importers had to pay about Rs 1 billion to the Sri Lanka Customs from the profit they earned. Out of that Rs 1 billion, Rs 576 million was paid as fines to the Import Controller. So, if we favour the businessmen, why do we fine them?
The main question which the public asks is the alleged role of Pyramid Wilmar Pvt. Ltd., behind this import.
A: When we amended the import tax on sugar, about 90,000 MT had already been imported. Normally, our monthly consumption is 50,000 MT of sugar. About 5,000 MT is manufactured locally. Therefore, when the tax was imposed, we had sugar stocks sufficient for up to 2 months. At that moment, the price of 1MT of sugar was USD 368 in the global market. The businessmen predicted that it would be increased to USD 450 by November/December in 2020. This prediction was proved correct later. Now 1 MT of sugar is priced USD 452. Therefore, Wilmar Company had about 8,000 MT in bonded warehouse. When you keep a stock in a bonded warehouse you have the advantage of pushing out the payment of Custom duties until the goods are released from the warehouse. That facility was granted them by former Government.
Although Wilmar Company had this facility, other businessmen didn’t. The other businessmen had imported sugar paying increased tax. They refused to release their sugar stocks to the market at lower price. That was when Wilmar Company released their stocks.
People say that despite taxes being lowered from Rs 50 to Rs 25, there was no benefit to the people.
A: Following this revelation, we are planning to impose a fine of Rs 5,000 to every company that sold sugar at a higher price. Whatever happened we had established this tax relief with the intention of benefiting the people. Similar, to how taxes are increased, even when decreasing taxes, it must be done properly.
What do you have to say about Wilmar Company’s importing more sugar than was required?
A: In the past 286,000 MT of sugar was imported to the country and out of this, 126,000 MT were from Wilmar. From this however, Wilmar claimed that sugar imported by several other businessmen had also been included. Wilmar stated that they had imported the sugar together. We have asked the Consumer Affairs Authority about this. It was revealed that due to a shortage of containers in the past, they were all imported together.
However, one thing is clear. In the past, due to a breach of importing conditions, fines of Rs 275 million were issued and Wilmar had to pay Rs 254 million of it.
Why did Pyramid Wilmar exclusively receive preferential treatment from the Government?
A: No, if that’s the case they are allowed to speak to the Import-Export Authority and change the fine. We didn’t do anything like that. Only in the previous Government did Wilmar receive relief. Businessmen support the Government; it’s not an accusation you can frame on us alone.
Ministers of your own Government are talking about the swindle saying that this fraud could be clearly seen by anyone.
A: As representatives of the people, they have a responsibility to discuss the problems of the people. However, many are saying is that Rs 15 billion has been stolen by Wilmar.
Wilmar has paid Rs 10 billion for the sugar they brought. How can you steal Rs 15 billion from what originally cost the company Rs 10 billion?
Some people say the sugar swindle was a larger issue than the bonds fraud, is this so?
A: All we did was place a price control on sugar. We did this by issuing a Gazette Notification. Somehow this was not the price it was eventually sold at. Keep in mind that without these price controls, people would not be able to afford even essential food.
Those who did not follow these laws will be given a fine of Rs 1 million. As a result, businesses will follow the law. When this happens businesses often claim to be exploited, but we wish to bring a benefit to everyone in the country.
The Government lost on taxes and it is said that a 100 percent benefit of the relief was not passed down to the public.
A: For the question that was asked the answer is no. From the Rs 14 billion that was spent at least Rs 8 billion did go to the public. Yes there were inefficiencies in the way the Government distributed those resources but that is an entirely different question.
What is important to remember is that without the Government incurring losses we cannot provide the relief to the people. The question that was asked about the public not receiving any resources is unfair and inaccurate.
As the Minister I do not support anyone who commits fraud and have no reason to protect them. I am speaking to you with all the facts and data I have received from all the necessary ministries. We are not thieves and will not accept anyone who commits unethical actions.
The previous Government robbed from the Central Bank in broad daylight which was preposterous. I can speak about these things because I did work in these committees. We are fully aware of the Central Bank Governors actions.
However, those who are talking about the sugar swindle are speaking without knowing the full story and it cannot be compared to the Bonds Scam. It was disappointing to see those who know about our economy so well having no regret in stealing from the Central Bank.
Are you then saying that there was no Sugar swindle?
A: After receiving all the information from the relevant authorities I can confidently say that no such thing occurred. No matter what is said there was no Rs 15 billion loss of resources. I will hold myself accountable for my words and take responsibility for the statements I have made.