Food: Crisis crumbles to crumbs

Is Sri Lanka on the verge of its own food crisis? This appears to be the question on the minds of most people as the government has started stamping down on soaring prices and illegal stockpiling of locally produced rice. This happens to be in the backdrop of growing concerns of a global food crisis and a severe shortage of rice in Asia.

Trade and Consumer Affairs Ministry secretary, Dr. R.M.K. Ratnayake said the government took the decision this week to ease the burden on consumers by introducing a new price ceiling on wholesale and retail sales of local rice. By this means the government hopes to control the rapidly increasing rice prices which rose to Rs.100 a kilogramme in recent weeks.

The move caused widespread dissatisfaction amongst millers and wholesale traders who complained that the current stocks in the market were bought at higher prices than the new prices stipulated with some traders even opting to stop the sale of rice leading to panic amongst consumers.

Dr. Ratnayake pointed out that the cost of production of rice was about Rs.12 to Rs.13 and traders purchase the stocks at a minimum of Rs.22 a kilo. But when the rice reaches the retail market there is a steep increase in the price which goes beyond Rs.85 at most retail outlets.

“The government spends Rs.2,000 on a bag of fertilizer and sells it to the local farmer at a subsidized rate of Rs.350. We have also stipulated a minimum buying price for a kilo of rice to be paid to our farmers. We have taken all stakeholders into consideration when preparing the new price ceilings,” he said.

Dr. Ratnayake said the government would closely monitor the reaction of the millers and the traders on how they handle the new price system and would take the necessary steps to punish those who break the law by either over pricing or stockpiling.

Before the Avurudhu season, the government in a bid to allay fears of any scarcity assured consumers that rice imports would arrive soon from Myanmar. But yet again the government changed the time frame by saying rice stocks would arrive next week.
Dr. Ratnayake said there was no shortage of rice in the domestic market despite the recent floods destroying a large portion of this year’s paddy harvest, but as a precautionary measure the government had taken steps to import some 200,000 metric tonnes of rice from Myanmar and India. He said if at all a scarcity of rice might occur during October and November.

“We will receive 100,000 metric tonnes from Myanmar next week and we hope to get an additional 100,000 metric tonnes from India,” he said. Spokesman for the Indian High Commission in Colombo, Dinkar Asthana confirmed that there still had been no reply from New Delhi on the request for rice imports made by President Mahinda Rajapaksa himself last month.

Last year Sri Lanka imported only around 75,000 metric tons of rice amid concerns of shortages. This time the government hopes to keep a buffer stock of about 200,000 metric tonnes in case millers and traders begin to withhold their stocks.

The dissatisfaction expressed by the traders was evident in the Pettah wholesale market. Usually a hive of activity with the movement of traders and lorries many of the rice traders were still to begin operations after the New Year while the few who had resumed business complained of a lack of rice stocks.

A trader from Kajaluxme Trade Centre said millers were refusing to send stocks of rice to the wholesale market as they had already purchased the rice from farmers at higher prices and refused to sell their stocks at the government stipulated prices.

“If we get the stock from the millers then we will sell at the given prices but the millers will suffer big losses when they sell us their stocks. Until such time we have nothing to sell,” he said. VM Traders complained the supply situation was so bad that they had just one 50kg bag of samba for sale with no stocks coming to the market after the New Year season.

A trader from Marandagahamulla, one of the main rice distribution centres for the Western Province told the Sunday Times he had purchased a 64kg bag of paddy for Rs.2,550 which works out to Rs.40 a kilo and this had to be sold at the government stipulated price resulting in a loss.

He said at the current prices they were losing about Rs.600 for a bag of Samba and would have to buy paddy at Rs.30 a kilo if they were to prevent further losses. The trader said they would have to stop going to Polonnaruwa to purchase paddy during the next few weeks and thus compel the farmers to reduce their prices.

Meanwhile Pettah Traders’ Association President S.P. Sami said after the discussions held between various Trade Associations on Friday, all the parties concerned had agreed to sell rice at the maximum prices imposed by the government.“Some of the stocks have been purchased at between Rs.15 and Rs.20 above the stipulated prices but we have agreed to comply with the government’s order to sell rice at the maximum wholesale prices,” he said.

However Mr. Sami said prices of imported rice would not be subject to the new price ceiling as the exchange rates and other added costs would have to be taken into consideration. Despite the Traders Association arriving at some agreement, many wholesale traders in Pettah were still complaining that the government imposed price ceiling was keeping millers away from the market.

The Consumer Affairs Authority (CAA) performed raids on the few shops that were open in the Pettah and charging one such shopkeeper for refusing to sell stocks and over pricing.

The trader’s local rice stocks were confiscated and he was asked to take the matter up with the CAA on Monday. The owner of Theptha Trading Centre argued that he had less than five minutes to adjust his prices after attending the meeting with the Traders Associations held that afternoon.

The other traders nearby soon closed operations upon seeing their fellow trader’s stocks being marked for confiscation and there was further confusion when the CAA officers found it difficult to locate any willing hands to help load the truck with the confiscated goods.