Greed-driven requests to hike tariffs on tiles

Few weeks ago, at an event graced by the President’s Chief of Staff Sagala Ratnayake as the Chief Guest, a leading tile manufacturer in the country had asked to raise import duties on tiles to tackle the alleged dumping of the commodity from suppliers in India and Bangladesh. The request comes in the wake of the Government removing import restrictions on tiles by a gazette on 9 October.

The import restrictions on ceramic items came into effect in April 2020 with the onset of the COVID pandemic. On 2 February 2021, the then Finance Minister Mahinda Rajapaksa issued a gazette enabling the importation of tiles on 180-day credit but only to be reversed on the following day reportedly due to the influence of the then extremely powerful Presidential Secretary P.B. Jayasundera. Yet again, efforts are made by some of the local manufacturers to influence the individuals who are close to the highest echelons of power in order to secure their financial interests, while infringing the economic freedom of citizens.

Prior to the import ban, a 2×2 tile was Rs. 425; however, with the restriction of imports, it went up to as high as Rs. 2,100. Since the import ban was lifted, the prices of tiles as well as sanitaryware items have been declining, and that has benefitted a vast number of individuals in the country.  The reduction in the prices of tiles would offer a much needed boost to the construction sector which has been in doldrums over the last few years. The lowered tile prices will give rise to a spill over of economic benefits to various sectors of the economy such as retail trade, hotels, and transportation firms in addition to freight forwarders. Moreover, increased imports will increase the tax revenue of the Government apart from easing the financial pressures felt by newly married couples as it is reported that tiles account for around 20% of the total cost incurred to build a home. 

Although imports have been allowed, a duty of 115% is charged at the CIF price of a tile, which is higher than the tariff rate that prevailed prior to the pandemic – 94%. There are five local tile manufacturers in the country. In that context, imported tile products create a more competitive environment in the tile market which ensures the well-being of consumers. During the period in which foreign-made products were disallowed, local manufacturers earned supernormal profits at the expense of consumers and tiles became a luxury item which the common man could not afford. 

Sri Lanka exports both floor tiles and wall tiles to a number of countries across the globe. If the local companies are capable of competing in the highly competitive, international market, why are they expressing unwillingness to compete against the imported products in the local market? It is alleged that tile firms are keen on overcharging local customers to achieve the required financial strength in order to subsidise their foreign customers. The Wickremesinghe administration has declared its aim to convert Sri Lanka into a dynamic, export-oriented economy. When the Government has embarked upon seeking increased access to overseas markets, the domestic market cannot remain closed for imports. 

Further, given that tile importing countries represent Sri Lanka’s sovereign creditors; restricting imports from such markets would cause diplomatic rifts. The Government is carrying out negotiations with India to enter into an Economic and Technology Cooperation Agreement; hence, creating barriers against imports from the neighbour is not logical.

Sri Lanka’s business community must understand the dynamics of international trade and need to abandon their obsession with protectionism which is incompatible with the stated strategic objective of developing an export-oriented economy.