Colombo, May 6 (Sunday Times): Sri Lanka spent more than half-a-billion dollars–or 0.8 percent of the country’s GDP–on tax-free gold imports last year, with much of it being smuggled to India. Gold was Sri Lanka’s second largest import in 2017 in monetary terms after petroleum oils and oils from bituminous minerals (not crude), according to the UN Comtrade database. It included gold plated with platinum, unwrought or in semi-manufactured and powder form.
The total quantity imported was 15,834 kg at a staggering US$ 649,921,536 (more than Rs 102 billion) in foreign exchange that Sri Lanka could ill afford to lose. Sri Lanka also spent $479,468,032 (Rs 75.5 billion) on importing telephones last year. This includes telephone sets, including telephones for cellular networks or for other wireless networks; other apparatus for the transmission or reception of voice, images or other data (including wired/wireless networks). These came eighth on the list of imports, in monetary terms.
In twelfth place were 16 aircraft (the relevant HS category includes helicopters, aeroplanes, spacecraft including satellites, and suborbital and spacecraft launch vehicles) at a cost of US$ 325,316,027 or Rs 51.25 billion. The gold was brought without duties under a scheme Ravi Karunanayake, the former Finance Minister, introduced in 2016 awarding 50 licences through the Central Bank of Sri Lanka (CBSL) to import the precious metal tax free.
While the objective was to encourage foreign investors to set up businesses in Sri Lanka and to encourage jewellery production, “there are no signs of that having happened,” a CBSL source said. “Exports did not pick up and, to the best of my knowledge, nobody came from Dubai or Singapore to set up business here,” he said.
There was also no corresponding increase in domestic jewellery production or rise in local consumption.” And, while bleeding out foreign exchange in the import of all that gold, Sri Lanka gained nothing by way of duties. In the first three months of 2018 alone, another 8,000kgs were brought in. This is nearly equal to the total amount of gold imported during the whole of 2016. In April this year, the Government imposed a 15 percent tax on gold imports, bringing it on level with the duty in India. This caused the domestic price of the precious metal to rise significantly, hitting the Sri Lankan consumer.
In recent days, law enforcement authorities on both sides of the Palk Strait have detected hordes of smuggled gold making its way into India from Sri Lanka. A massive 32.249kgs of gold was seized in Chennai over 24 hours this week, with Indian media saying it all came from Sri Lanka.
The top ten imports in monetary terms are petroleum (excluding crude), gold, fabrics, petroleum (including crude), motor cars and other motor cars including station wagons and racing cars, Portland and other types of cement, telephones, medicines and iron or non-alloy steel.