In October 2020, the Department of Trade and Investment Policy reduced the tax on imported sugar from Rs 50 to 25 cents per kilogram. What seemed like a measure to ease consumer prices soon became one of Sri Lanka’s most scrutinised fiscal decisions, with the state losing approximately Rs 16 billion in revenue. 

What Happened? 

The tax reduction took effect on 14th October 2020. According to the Finance Ministry’s report to the Parliamentary Committee on Public Accounts in March 2021, the measure resulted in a loss of Rs 15.9 billion to the treasury. The Ministry noted that this sum, in whole or in part, benefited a small group of individuals rather than the general public. 

Parliamentary Committee member Dr Harsha De Silva explained that despite the tax cut, retail sugar prices did not fall proportionately. A small group controlled market prices, preventing consumers from receiving the intended benefit. One company, Pyramid Wilmar, reportedly imported 1,222 per cent more sugar than usual between October 2020 and February 2021. According to the National Audit Office, which conducted a special audit in April 2022, importers subverted the government’s intention to provide consumer concessions, keeping prices the same and instead using the tax cut to increase their economic advantage.

The audit report’s findings were stark: importers who benefited from the tax reduction did not pass these savings to consumers, while the state’s lost revenue exceeded initial estimates.

The Investigation

Former parliamentarian Sunil Handunnetti filed a Fundamental Rights petition at the Supreme Court in March 2021, seeking to recover the lost revenue from those responsible. The Commission to Investigate Allegations of Bribery or Corruption summoned then-Trade Minister Bandula Gunawardena for questioning in December 2022. Presidential Secretary Dr P.B. Jayasundera was also questioned and reportedly stated that the President had cleared the duty reduction.

In June 2025, the Criminal Investigation Department informed the Colombo Magistrate’s Court that the Attorney General had concluded that no criminal offence occurred in the tax reduction process. However, the civil case continues. On 30th October 2025, the Supreme Court fixed Handunnetti’s petition for support on 19th January 2026.

The Outcome

State Finance Minister Ranjith Siyambalapitiya informed Parliament in November 2022 that the treasury could recover only 30 per cent of the Rs 16 billion loss. The National Audit Office recommended the immediate recovery of revenue from importers who profited from the tax cut. The Human Rights Commission urged the government to implement these audit recommendations, noting that the arbitrary use of state powers undermines the economic and social rights of citizens.

The case remains unresolved. While criminal proceedings have been closed, the question of recovering public funds continues through the civil courts, with the next hearing scheduled for early 2026. The ease with which the sugar importers hijacked a government policy that claimed to reduce prices raises questions about whether the initiative’s intended beneficiary was ever truly Sri Lankan consumers, or rather the sugar importers themselves.