Press Reader (24/05/2026) - Sri Lanka's coconut industry is facing a quiet but dev­ast­at­ing crisis. The threat does not stem from a lack of domestic demand, but from sys­temic reg­u­lat­ory gaps.

These loop­holes allow massive volumes of Crude Palm Olen and refined oil frac­tions to flood the domestic mar­ket, bypassing the checks and bal­ances designed to pro­tect the local eco­nomy, coconut industry offi­cials com­plained.

This influx of sub­sid­ised palm oil aggress­ively sup­presses local edible oil prices. Unable to com­pete with these low prices, local mills are shut­ting down, driv­ing down the farmg­ate prices of domestic coconuts.

"Our mills are grind­ing to a halt because the mar­ket is being flooded with cheap, impor­ted palm oil that evades stand­ard industry scru­tiny," warned a mem­ber of the Coconut Miller and Farmer Asso­ci­ation.

“We are demand­ing a level play­ing field. When for­eign-backed enter­prises bypass the Min­istry of Indus­tries, they are not just import­ing oil they are affect­ing the live­li­hoods of Sri Lankan farm­ers."

The gov­ern­ment came up with gaz­ette noti­fic­a­tion No.2222/31 in April 2021. This import­ant step had been recom­men­ded by a power­ful com­mit­tee to pro­tect agri­cul­ture and con­sumers. Sub­sequently, a heav­ily reg­u­lated license sys­tem was put in place.

Later, a highly reg­u­lated licens­ing sys­tem was intro­duced. Stand­ard edible oil import­ers had to pay a 0.4 per cent fee to the Depart­ment of Import and Export Con­trol, sub­ject to strict vet­ting by the Min­istry of Indus­tries and the Coconut Devel­op­ment Author­ity (CDA).

However, a glar­ing struc­tural dis­con­nect between state agen­cies has com­prom­ised this entire frame­work.

Under cur­rent laws, com­pan­ies with Board of Invest­ment (BOI) status ori­gin­ally set up under bilat­eral treat­ies like the Indo-Sri Lanka Free Trade Agree­ment (ISFTA) to man­u­fac­ture export goods like Vanas­pati can leg­ally pivot into the domestic mar­ket, a senior offi­cial of the Indus­tries Min­istry told the Sunday times Busi­ness

Vanas­pati is a hydro­gen­ated or par­tially hydro­gen­ated veget­able oil. By lever­aging their spe­cial­ised status, these entit­ies obtain dir­ect quota alloc­a­tion let­ters for 4,000 to 8,000 met­ric tonnes of oil monthly, he explained.

The Import and Export Con­trol­ler accepts these BOI recom­mend­a­tions, com­pletely bypassing the man­dat­ory vet­ting pro­cesses of the Min­istry of Indus­tries and the CDA.

Ship­ments are cleared dir­ectly into Sri Lanka Ports Author­ity-bon­ded tanks, allow­ing com­pan­ies to evade upfront cus­toms duties and taxes.

By pay­ing levies in small, ex-bond batches only dur­ing local mar­ket release, they elim­in­ate the heavy fin­an­cing and upfront interest costs that 100 per cent domestic man­u­fac­tur­ers must bear

By occupy­ing up to 15,000 met­ric tonnes of com­mon-user tank farm space at the port, large entit­ies phys­ic­ally block com­pet­it­ors from import­ing bulk oil effi­ciently, man­u­fac­tur­ers com­plained.

The Import and Export Con­trol­ler must be leg­ally man­dated to reject isol­ated BOI let­ters. All edible oil enter­ing the domestic mar­ket regard­less of BOI status must require a man­dat­ory "No Objec­tion Cer­ti­fic­ate" (NOC) from the CDA and the Min­istry of Indus­tries.

A min­istry offi­cial said the Treas­ury is con­sid­er­ing the imple­ment­a­tion of an imme­di­ate reg­u­lat­ory sur­charge on any oil cleared from bon­ded tanks for local con­sump­tion to elim­in­ate the unfair cash-flow advant­age over domestic pro­cessors.

Read more at https://www.pressreader.com/sri-lanka/sunday-times-sri-lanka/20260524/282501485283353