Tuesday, 17 August 2021 11:00

Tariffs backfire

Written by Milking It

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OPINION: New Zealand, and in particular Fonterra, has come under scrutiny in Sri Lanka for taking home the lion's share of the country's spend on imported powdered milk.

Attemption to 'fix' things, successive Sri Lankan governments have tried to boost local milk production and raise tariffs to stem the US$370 million spent annualy on milk powders.

The law of unintended consequences prevailed and Sri Lanka now has a milk powder shortage. So Fonterra may have the last laugh. Sri Lankan Finance Minister Basil Rajapaksa is looking at reducing the taxes imposed on imported powdered milk to arrest the shortage currently prevailing in market. This could mean more Fonterra milk powder heading to Sri Lanka.

The island nation's milk production is still only around 40% of the total requirement meaning it has to import 60% of its requirements.

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