Sri Lanka Imports

Sri Lanka may temporarily lift a 35 percent import tax on maize to prevent prices going higher and hurting the island's poultry industry after floods destroyed a part of the domestic crop, an official said.
Good news for BFL

http://lbo.lk/fullstory.php?nid=1696537603

Actually its bad news for BFL comparatively. They already have a maize producing for themselves.
IT will be great news for TAFL though as they are paying a premium as I know currently.
So when BFL is competing with the rest of the sector now they loose there competitive edge they had already!

Rajitha wrote:Actually its bad news for BFL comparatively. They already have a maize producing for themselves.
IT will be great news for TAFL though as they are paying a premium as I know currently.
So when BFL is competing with the rest of the sector now they loose there competitive edge they had already!

\

Rajitha,

Am not sure exactly how it will be bad news for BFL. It will be good news for TAFL yes.

On BFL case
1) we do not know how much maize they are growing themselves. If they are also buying any amount from market this will benefit them also.
2) Unless TAFL chicken prices are reduced than BFL , BFL revenue should not get effected . So loosing competitive edge I am not sure with regard to their earnings.


However , I agree TAFL/GRAN will benefit from this to gain higher profit margin as the cost of production is reduced . But how would BFL loose revenue and profits is not clear unless case 2 above.

As there is also a apparent shortage of chicken the demand for BFL, TAFL GRAN should still remain in the medium term isn't it.


I

slstock wrote:

Rajitha wrote:Actually its bad news for BFL comparatively. They already have a maize producing for themselves.
IT will be great news for TAFL though as they are paying a premium as I know currently.
So when BFL is competing with the rest of the sector now they loose there competitive edge they had already!

\

Rajitha,

Am not sure exactly how it will be bad news for BFL. It will be good news for TAFL yes.

On BFL case
1) we do not know how much maize they are growing themselves. If they are also buying any amount from market this will benefit them also.
2) Unless TAFL chicken prices are reduced than BFL , BFL revenue should not get effected . So loosing competitive edge I am not sure with regard to their earnings.


However , I agree TAFL/GRAN will benefit from this to gain higher profit margin as the cost of production is reduced . But how would BFL loose revenue and profits is not clear unless case 2 above.

As there is also a apparent shortage of chicken the demand for BFL, TAFL GRAN should still remain in the medium term isn't it.

I

Well as you said we don't know if this happens if they want to import mazie at all as if they already have enough in their production! But ofc when you competitors gain a huge price advantage thats never good for you! according to you at sometime ofc there might be more demand than supply. So what will they do then is only give there products to the markets that have extra demand only ? No they always have to compete with the rival brands or take huge loss!

Also as the MAYS you said we don't even know how long government will allow this as well remember! Maybe they would only allow this for 1 month maxx!

Mountains out of molehills. this is a temporary measure to make sure some of the small farmers don't starve to death & people like TAFL don't register losses. This is damage control. From the looks of it a lot of the local maize crop has been wiped out and there is shortage at the moment. the government is levying import duty for 'one to two months' so that this loss can be better absorbed or negated.

more interestingly, where are the BFL maize farms. I wonder if they are destroyed as well.

from the looks of it the BFL operation is centered around puttlam. so their crop should be fine.

mono wrote:from the looks of it the BFL operation is centered around puttlam. so their crop should be fine.

Puttalam farmers put in a spot
The farming community of Puttalam district is reeling from the devastation of the recent floods, which have destroyed homes and paddy fields, their only source of income. The farmers’ tales are of heartbreak and misery. These days they are left with little to do but grieve over losses that run into lakhs of rupees, while hoping the next season will be free of catastrophe...
20 Feb 2011
http://sundaytimes.lk/110220/News/nws_15.html

Hope the government gives at least seeds for the next season and ease their debts. And hope nothing bad repeats again.

Rajitha wrote:

slstock wrote:

Rajitha wrote:Actually its bad news for BFL comparatively. They already have a maize producing for themselves.
IT will be great news for TAFL though as they are paying a premium as I know currently.
So when BFL is competing with the rest of the sector now they loose there competitive edge they had already!

\

Rajitha,

Am not sure exactly how it will be bad news for BFL. It will be good news for TAFL yes.

On BFL case
1) we do not know how much maize they are growing themselves. If they are also buying any amount from market this will benefit them also.
2) Unless TAFL chicken prices are reduced than BFL , BFL revenue should not get effected . So loosing competitive edge I am not sure with regard to their earnings.


However , I agree TAFL/GRAN will benefit from this to gain higher profit margin as the cost of production is reduced . But how would BFL loose revenue and profits is not clear unless case 2 above.

As there is also a apparent shortage of chicken the demand for BFL, TAFL GRAN should still remain in the medium term isn't it.

I

Well as you said we don't know if this happens if they want to import mazie at all as if they already have enough in their production! But ofc when you competitors gain a huge price advantage thats never good for you! according to you at sometime ofc there might be more demand than supply. So what will they do then is only give there products to the markets that have extra demand only ? No they always have to compete with the rival brands or take huge loss!

Also as the MAYS you said we don't even know how long government will allow this as well remember! Maybe they would only allow this for 1 month maxx!

Rajitha

"So what will they do then is only give there products to the markets that have extra demand only ? No they always have to compete with the rival brands or take huge loss!"

Well the issue is with reduction of maize costs or not can BFL,TAFL, GRAN all combined still meet the demand? To meet the demand they have to increase production volume wise. Not sure how maize prices will help to increase production volume/capacity wise. Yes it will help to gain higher profitability for the current prodcution volume/revenue. So the more important thing is expansion for higher production isn't it? We know BFL has an expansion with Tax free farm. We are still monitoring how TAFL/GRAN will be expanding.

Let take another scenario:

In the case of there is more demand than supply assuming the volume output of BFL,TAFL/GRAN does not increase , there is no change for competition as all collective supplies stilll do not meet demand. Even if TAFL reduces prices compared to BFL to create artifical competiton then their revenue will dip. Maize benefit will be minimized . After all this still there will be demand for BFL,TAFL.,GRAN due to shortage.

In the case of there is more supply than demand ( positively assuming TAFL/GRAN output volume also goes up ) then BFL will have to compete I agree. Then again we go back to the point whether TAFL will also reduced chicken prices than BFL to create competition for BFL. Also will they have higher supply power than BFL? If they reduce prices then percentage wise revenue will go down somewhat. Then TAFl has to balance the reduction in existing prices vs the gain they get from maize savings to maintain higher profits.

I see a fine balance here. If they want to go ahead of BFL they have to increase output capacity to increase revenue to be sucessfull in the above case.

So in summary what I still think is

a) Yes, due to reduction in maize prices TAFL/GRAN will benefit in profitability compared to previous quarters..
b) for TAFL /GRAN to have competive market edge over BFL they need to increase their market volume to meet more demand.
Keeping volume same while reducing costs will not increase profits . Not market share.


In any case this Tax benefit seems to be a temporary measure when it kicks in. You are right when you said " Also as the MAYS you said we don't even know how long government will allow this as well remember! Maybe they would only allow this for 1 month maxx!"

So TAFL /GRAN should look at long term cost reduction and capacity growth/expansion to give higher competition.

Disclosure : I hold some quantities of both BFL and TAFL at this time.

You think SLstock that every store in Country that buy poultry have extra demand ?
Only at certain periods and in certain parts only the extra demand making all stocks getting sold apply!
Can you remember what happened to DIAL when other competitors enter the market? Not saying that will happen to BFL but thats what happens with extra competition and with a competitive edge! Don't believe every thing people feed you saying there are more demand for chicken than can supply btw always!

Also it seems BFL maize crops seems to be in floods also! So well maybe they will also be importing them with the rest of the lot! But ofc they have to bear the huge loss from their own crops!

I'm not against BFL but would like to give another view and not just the one dimensional promoting the shares keeps getting with every news!

PS:- haven't used any votes here like in sometime! So people getting + or - is not from me

Very Important.
Why they reduce.....?
Polycy markers / government / central bank, now understand the real situation in sri lanka.

I can clearly tell one thing. TAFL, GRAN & BFL will have a massive benifit.
All Poultry shares will pick again very soon.

Especialy, TAFL will have a massive rally in comming days.
Did you analize their last quarterly report.
Perputual Capital has increse their holding of TAFL, GRAN & BFL.
They know the value, that's why they are collecting.

Last week I noted, in each day some one has collected TAFL massively with the range of Rs.160 to Rs.170.

High.Risk.High.Return wrote:Very Important.
Why they reduce.....?
Polycy markers / government / central bank, now understand the real situation in sri lanka.

I can clearly tell one thing. TAFL, GRAN & BFL will have a massive benifit.
All Poultry shares will pick again very soon.

Especialy, TAFL will have a massive rally in comming days.
Did you analize their last quarterly report.
Perputual Capital has increse their holding of TAFL, GRAN & BFL.
They know the value, that's why they are collecting.

Last week I noted, in each day some one has collected TAFL massively with the range of Rs.160 to Rs.170.

Reason they reduced prices is to avoid these companies to undergo huge loss from astronomical mazie prices and to get the required amount to the farms! Do you really think this will continue once the locals farms are up and running ? IMO this will last maximum 1-3 months of taxxx reduced imports!
Also how do you know what price they have been already paying for the maize? There was a reason why government is hoping to do this! So maybe next quarter you might see the earnings of most of these stocks have more than halved paying for extremely high products!(OFC its the off season so obviously thye will have lower return than last quarter)

Rajitha wrote: You think SLstock that every store in Country that buy poultry have extra demand ?
Only at certain periods and in certain parts only the extra demand making all stocks getting sold apply!
Can you remember what happened to DIAL when other competitors enter the market? Not saying that will happen to BFL but thats what happens with extra competition and with a competitive edge! Don't believe every thing people feed you saying there are more demand for chicken than can supply btw always!

Also it seems BFL maize crops seems to be in floods also! So well maybe they will also be importing them with the rest of the lot! But ofc they have to bear the huge loss from their own crops!

I'm not against BFL but would like to give another view and not just the one dimensional promoting the shares keeps getting with every news!

PS:- haven't used any votes here like in sometime! So people getting + or - is not from me

I am talking about the overall demand supply situation on a larger scale and expansions to meet more output capacity. I think we have have discussed enough from my point of view and yours about these 3 farms.

The BFL/TAFL/GRAN is in profit anyway and has resources for expansion if they want to. ANyway , I hope this measure will help the small time farms and breeders to get back on their feet on their losses. This measure to target and protect these small guys with limited resources is more important at this stage.

* Ignorance and negligence prevent South Asians from realising gains from trade
From improved trade ties with South Asia, study shows


While the country struggles to recover from a balance of payments crisis, a recent study shows that Sri Lanka can cut its import bill by 31 percent, at the least, and make considerable welfare gains if intraregional trade improved.

A recent study ‘Consumers and Economic Cooperation: Cost of Economic Non-cooperation to Consumers in South Asia’ authored by Bipul Chatterjee, Deputy Executive Director, CUTS International and Joseph George, Research Associate, CUTS International, shows that South Asian consumers are expected to gain more than US$ 2 billion annually as a result of enhancement of intra-regional trade.

Currently, intra-regional trade in South Asia is hovering around five per cent of total trade of regional economies – the lowest percentage among all regional blocs in the world. Importantly, this will be a static gain estimated from possible sourcing of imports from within the region as against from rest of the world. Dynamic gains would be much higher if tariffs are reduced and non-tariff measures are addressed.

"Though aggregate welfare gains of Sri Lanka amount to a comparatively lower figure of US$ 288.61 million, per capita gains to the country would be the highest, as it is the least populated amongst the selected South Asian countries. On the 27 product categories included in its sensitive lists, diverted imports from within the region would help Sri Lanka to save 31.42 percent of its current import expenditure. Almost all of its expected gains come through imports from India in mineral fuels and oil by-products," the study showed.

However, the study points out that Sri Lanka would not gain by imports from Bangladesh, as its own export basket constitutes articles of apparel and is price competitive and capable of capturing part of the South Asian textile market with Bangladesh. Though the welfare gains accruing to Sri Lanka, by way of imports from Nepal, are only US$1.88mn, the island nation is set to save close to 60 percent of imports from the rest of the world (RoW) by choosing alternatives from Nepal on certain items.

Sri Lanka also has the scope of improving its exports to the region.

"Sri Lanka’s prospects are spread between textile items and cash crops, including rubber, tea and spices," the study showed.

The current aggregate import bills paid to RoW by the SAFTA members under consideration on these product categories amount to US$ 6,212.83 million. Intra-regional trade at reduced prices would generate 31.36 percent savings on this import expenditure, leading to annual savings of about US$ 1,948.15 million for buyers belonging to the region.

Welfare gains that would be made by Pakistan is US$ 206.18 million (59.04 percent savings on imports), India US$ 597.29 million (54.52 percent savings), Nepal US$ 457.50 million (42.83 percent), Sri Lanka US$ 288.61 million (31.42 percent) and Bangladesh US$ 398.56 million (14.33 percent).

The study covered five of the eight South Asian countries, viz. Bangladesh, India, Nepal, Pakistan and Sri Lanka.

The quantitative assessment of the COENCOSA study shows a minimum consumer welfare gain of approximately US$ 2bn a year by way of savings on aggregate consumer expenditure on imported products in selected categories.

"However, the estimated figure represents only the minimum gains which will increase exponentially if the long run impacts of positive cycle of growth in intra-regional are considered. In other words, gains to consumers, as estimated in this study, is a static gain as it is based on existing tariff structure," the authors said.

"It is a well-known fact that today tariff accounts for about 15-20 percent of the cost of doing trade of a commodity. Non-tariff measures including customs procedures and other procedural non-tariff measures account for more than 80 percent of cost of doing trade. In South Asia, if non-tariff measures affecting the cost of doing trade are addressed properly then gains to consumers from an enhanced intraregional trade regime would be much than static gains. Further gains can be achieved from gradual liberalisation of intraregional trade in services and investment.

"A survey of some key stakeholders on their perception about enhanced intra-regional trade reveals that lack of reference to consumer welfare gains in the academic literature as well as in popular media has heavily influenced the perception of all categories of respondents.

"Generally, there exist very low expectations about consumer welfare gains, owing to either ignorance about the issue or negligence as an unimportant issue. While among producers/exporters and their associations, consumer groups and media ignorance about the issue is the main reason for low expectations, it is negligence among government officials and academia.

"Most respondents, irrespective of categories, believe that intra-regional trade in South Asia is currently underperforming and its potential is highly under-rated. A striking observation is that representatives of consumer groups in general are more unaware about consumer welfare gains from a more open and balanced international trade regime than most other groups. This is because most of them have less knowledge and little/no representation in trade policy making process in their countries and hence, have minimal exposure to the subject," the study showed.
http://www.island.lk/index.php?page_cat=article-details&page=article-details&code_title=56393

Sri Lanka has decided to impose a 100-pct margin deposit requirement against the Letters of Credit opened with the commercial banks for the importation of motor vehicles.

Central Bank in a statement issued said, this will not be applicable for buses, ambulances, lorries and trucks.

The latest move, the Bank says is aimed at cutting down the possibility of acceleration of motor vehicles to the Island nation in the period ahead, as currencies of several trading partner economies have sharply depreciated against the Sri Lankan Rupee during the year 2013.

The Central Bank believes that this trend should not be allowed to continue without a suitable response.

“Accordingly, Letters of Credit for the importation of specified vehicle categories could be done only with a minimum cash margin of 100 per cent, with immediate effect”, added the Bank in a statement issued.
www.news360.lk

Aug 30, 2013 (LBO) - Sri Lanka has imposed a 100 percent cash margin on letters of credit to import cars to slow the imports of cars, the Central Bank said as the rupee came under pressure in forex markets.

The central bank said currencies of several trading partners have weakened against the Sri Lanka rupees as both the Indian rupee and the Japanese yen fell.

"As a consequence, there has been a growing possibility that the importation of motor vehicles into Sri Lanka could accelerate in the period ahead," the monetary authority said in a statement.

"The Central Bank believes that this trend should not be allowed to continue without a suitable response."

The Sri Lanka rupee fell to a low of around 135 rupees in forex markets this week for leading to interventions by the Central Bank.

Bond yields also rose indicating some selling of gilts by foreign investors.

Sustained interventions by a central bank in currency markets which are followed by liquidity injections to sterilize the sales can result in rapid depreciation and reserve losses, as has happened in India.

In order to keep a currency stable, interventions have to be unsterilized and interest rates have to be allowed to go up.
http://www.lankabusinessonline.com/news/sri-lanka-tightens-rules-on-car-imports-amid-currency-pressure/753068189

Oops.  
Does anyone know if this is valid for already opened LCs? pls let me know.......

Lot more areas to tighten

We import lot of substandard Garments from China, while export quality garments to Western Countries. Branded garments (manufactured locally) cannot be sold locally, which is understood. The rawmaterials (Fabric) leftovers and excess could be used rather making it no use for anyone. Because we import substandard,cheap garments from India and China. Most of it are brought through customs in to the country by undervaluing, differences are sent by "Undiyal". Weak systems and corruption allows this

If we turn it the other way to benefit the manufacturers for local markets it will provide some employment opportunities. Help the Industry indirectly to survive. ( Washing plant and Embroidery plant will fill their capacity) save some foreign earnings.

Inland Revenue has put in place lot of Duty structures to save local Industry and to curtail imports. No use , because the Chinese imports are still cheaper, where these Pettah importers can creep through the customs loop holes.

This is just one example. There are a Medicines (Cephalexin,Seline),Foods ,Garments etc... where we can produce locally ,save FOREX & provide employment.

It’s a shame that the government only tighten the grip on small scale importers and government servants who want to buy new vehicles.
This is not going make any impact on large scale private importers. Perhaps they can ask more money from buyers (to cover the 100% margin) now onwards.

That’s disgraceful

Does this apply to Permit Holders

I think we could buy DIMO at 200-300 rupees sooner...

Hey Guys,

May be the entire Bunch is now enjoying the 2012 Models of Top of the Range Cars, So others have to stop now, This will be released once the Clan wants New Models. So we all can wait till that happens.

Hawk Eye wrote:

This is just one example. There are a Medicines (Cephalexin,Seline),Foods ,Garments etc... where we can produce locally ,save FOREX & provide employment.

You have a valid point

But 100% margin thing is a good step.
Also saw an article, if you sell your permit car then the new BUYER should have a Income Tax file opened....before the transfer take place.

By 2020 most will have to pay Income Tax with this, the Income tax officers will come knocking your door....

TAH

by FP Editors Sep 2, 2013

The depreciation of the rupee against the dollar is having an unlikely fallout on Tata Motors. Faced with increased restriction on car imports in Sri Lanka, the company may have to phase out its ultra low cost car Nano from the country, said a report in The Hindu.

Sri Lanka’s central bank last week made it mandatory for car importers to pay 100 percent margin to banks for letters of credit (LCs).

The bank’s move is aimed at curbing imports from its trading partners, including India, who have witnessed a sharp currency depreciation against the dollar.

“As a consequence (to falling currencies), there has been a growing possibility that the importation of motor vehicles into Sri Lanka could accelerate in the period ahead. The Central Bank believes that this trend should not be allowed to continue without a suitable response,” the central bank has been quoted as saying in a press release. It will review the new rule after six months.

According to this report, Sri Lankan imports increased to $1636.50 in June 2013 from $1548.80 million a month ago. The country imports petroleum, textile fabrics, foodstuff and machinery and transportation equipment and the key partners are India, China, Iran and Singapore.

The latest move will impact auto exports from India to the island nation, where, according to The Hindu report, 75 percent of the vehicle imports are from Indian companies such Tata Motors and Maruti Suzuki.

According to the report, in May 2011, when Nano was launched in the island nation, it cost just Lankan rupees (LKR) 925,000 (which is about Rs 4.50 lakh). It rose to LKR 20 lakh after the government imposed an excise of LKR 750,000 on cars below 1000-cc.

The sales have already fallen from 400 a month at the start to 20 a month. With the new restrictions in place, there will be fewer imports of the Nano now.

The development is significant as it comes at a time when India is trying its level best to make the most of rupee’s fall. According to a report in the Economic Times today, exports prospects for Indian textiles and auto components have brightened of late as countries like Sri Lanka, the US and Germany find it profitable to import from India rather than from China.

This is because China’s yuan—a controlled currency—has appreciated even as the rupee has depreciated around 16 percent against the dollar this year. Depreciation of a currency makes the country’s products cheaper in the international market.

For a country like Sri Lanka, the depreciation in a trading partner’s currency spells trouble as there is a chance of cheap imports flooding the markets. That is the reason for the Sri Lankan central bank’s concern.

In an interview to Bloomberg TV on 16 August, central bank governor Ajith Cabraal raised concerns about the falling currencies of its partner countries but said their impact on LKR has been minimal.

This is because Sri Lanka has been able to build up a little more buffer than many of its partners, particularly India, he said. This is giving the central bank a little more space to manoeuvre, he said.

The rupee’s fall is giving ample opportunities for Indian companies to take advantage of. As TCA Ranganathanm, CMD, Export Import Bank of India, tells ET, “Opportunity is knocking.”

But Sri Lanka’s confidence can be a cause of worry for India. Should it prompt the smaller nation to take more steps to curb imports, it will hit India hard.
http://www.firstpost.com/business/rupee-painnano-may-lose-its-sri-lankan-market-1078771.html

Manipulation to prevent supper September also may be due to same reason