Budget a boost to producers

by Sunday Observer Business Desk

Chairman, Master Divers and Pelwatta Sugar and Mawbima Lanka Foundation Ariyaseela Wickramanayake welcomed the budget wholeheartedly saying that it is a great boost to local producers of sugar, milk and rice based products.

In addition it will also save a huge amount of foreign exchange for the country, said Wickramanayake. He said that the country will be able to save Rs 37bln on milk, Rs 15-16 bln on sugar and Rs 27bln on wheat.

We can produce these commodities in the country and improving the dairy industry will help reduce the COL and help the country become self-sufficient in milk in the next two years.

He said people in the country earlier did not know what fresh milk was but now this will change. A dairy farmer who sells 10 litres of milk will earn Rs 400 daily and he has to work for only about 3-4 hours.

The removal of VAT on rice based food is a big boost as this will help big-timers also to move into the industry. Earlier they did not want to get into it as the VAT component was involved. He said the removal of VAT on the sugar industry was long overdue but it was great that it has been done. He also hailed the move by the government to encourage local ship owners.

Senior Partner, KPMG Ford Rhode Thornton & Company Rajan Asirwathan said that the government had considered the proposals presented by the private sector which is very welcome.

But unfortunately they have not reduced the number of taxes which is very complicated for any company which is a good corporate. Therefore, streamlining the tax system is a must, he said.

CEO Union Assurance Thamara Dharmaratnam said that it is a positive and consistent budget with a clear direction. The most important aspect is that it promotes regional development specially in the Eastern Province.

Managing Director, Lanka IOC Ltd. K. Ramakrishnan said the reduction of VAT on petroleum products from 15 percent to 5 percent from January will benefit the petroleum industry.

He said if the selling price of petroleum products is not increased the burden will not be passed on to the people and will help to contain inflation.

"The budget has granted relief to the low income families by not making major proposals on taxes" , Ramakrishnan said.

He said the government's pledge to reduce the Excise Duty of Rs. 20 per litre on petrol if required is a positive move for the industry.

The 2008 Budget has given priority to boost local industries such as the dairy and sugar industry which will help to reduce the import expenditure.

Partner, Gajma and Co, Chartered Accountants, N. R. Gajendran said since there is no major tax proposals to raise revenue there will not be a big impact on the prices of commodities.

"If measures are not taken to curtail staggering inflation, the budget deficit will be enormous and there will be a major setback on the economy", he said.

He said when there is a huge budget deficit there will be a demand pull inflation. Though the rupee has stabilised with the raising of money through the sovereign bond it is only a temporary measure. The value of the rupee has to be sustained", Gajendran said.

The public investment which is around Rs 335 billion is not sufficient because only Rs. 200 billion has been allocated for development activities.

If one is liable to Economic Service Charge he will not be liable to the withholding tax which is a major relief to taxpayers when it comes to compliance.

He said encouraging people to invest abroad is a positive move for the economy but the exchange control has to be deregulated to derive the benefits of investments.