Sri Lanka takes back domestic tax on Pakistani kinnows

KARACHI: Sri Lanka has withdrawn a massive increase in domestic tax on Pakistani citrus – a decision that is likely to give a shot to exports from Pakistan, commerce adviser said on Friday.

Adviser on Commerce to Prime Minister Razak Dawood said the Sri Lankan government took back the increase in cess on import of kinnows and mandarins from Pakistan. The cess was reverted to 30 Sri Lankan rupee per kilogram from Rs160/kg.

“This positive development will boost the confidence of Pakistani exporters as the citrus season has commenced and Sri Lanka is one of the leading markets for small mandarins produced in Pakistan,” Dawood said in a tweet post.

The Sri Lankan government recently jacked up regulatory duty on the import of kinnow from Pakistan. The increase would lead to an increase in price of Pakistani kinnow to Rs35/piece in Sri Lanka from Rs10/piece.

Pakistan produces more than 2.4 million tons of citrus fruits and of which kinnow accounts for 70 to 80 percent.

Fruit exporters are expected to export $210 million of citrus to meet 350,000 tons target this season.

The Pakistan fruits and vegetable association took exception to the tax and warned the government if the issue was not resolved on time, Pakistan would not be in a position to meet the export target.

The kinnow sector was worth around Rs125 billion and the entire economy of Bhalwal and Sargodha depended on its production while about 250 kinnow processing factories located in Punjab were providing direct employment to 250,000 people.

Pakistani kinnows are also exported to Indonesia, the United States, European countries, and Russia.

This decision of the Sri Lankan government to impose tax was a reaction to Pakistan’s regulatory duty of Rs400/kg on betals (pan).

Bilateral trade between Pakistan and Sri Lanka which reached $460 million in 2018 has potential to cross $2.7 billion if they remove impediments to implementation of the free trade agreement.

The FTA between Pakistan and Sri Lanka was signed in August 2002 and came into effect in July 2005. The terms of the FTA were comprehensive and granted 100 percent immediate concessions to Pakistan and Sri Lanka’s major export products.

In 2018, Pakistan’s exports to Sri Lanka reached $357 million, while Sri Lanka’s exports to Pakistan reached $105 million leading to a trade surplus of $252 million in Pakistan’s favour. However, in real terms, Pakistan’s share fell and only slightly increased in 2018.