Sri Lankan government’s price control could trigger dhal and sugar shortage
Sri Lanka could face a shortage of imported essential commodities including dhal and sugar as a result of price control imposed by the government on retail traders amidst fluctuations in world market prices and the depreciation of the rupee against the US dollar, wholesale traders warn.Importers of dhal and white sugar have to pay high prices for their imports of essential commodities as they have to place orders in advance to continue their supply amidst world market price fluctuations, they said.
Sri Lanka is importing dhal from Canada and white sugar from India and the prices of those commodities have been rising at present.
The imposition of the Maximum Retail Price (MRP) will exert a great impact on the continuity in the supply of dhal and sugar as the importers cannot recover their costs, a member of the Wholesale Trader’s Association in Pettah told the Business Times. He revealed that wholesale dealers had to process and store large stocks of imported dhal and their total cost has shot up to Rs.200 per kg as result of high import prices, taxes, depreciation of the rupee and the cost of processing.
The MRP fixed price by the government was Rs. 169 per kg for dhal and the price controllers are conducting raids to crack down on retailers who are selling dhal at a price over the controlled price.In the case of sugar, the government has imposed an MRP of Rs. 89 per kg of sugar while the import cost alone is Rs. 94. A Pettah trader said that the authorities should remove the control price on sugar or bring down the duty on sugar imports from India and Brazil. Representatives of the association recently held discussions with Finance Minister Ravi Karunanayake but no decision has been taken as yet to remove the price control, he disclosed.
In an open economy, it is essential to allow market forces to determine the price of imported commodities while price control will definitely create shortages, an economic analyst told the Business Times. Dhal imports now account for more than 7 per cent of the country’s annual food and beverages imports. Sri Lanka imports Rs 970.2 million (US$6.3 million) of whole red dhal per month which is Rs.10.8 billion ($75 million) annually, Finance Ministry data revealed. Wholesale traders point out that the new control prices brings greater difficulties in sales and this would lead to a serious scarcity of dhal and sugar in the local market in near future.
The new maximum prices are introduced to safeguard consumers from sudden market hikes, Minister of Industry and Commerce Rishad Bathiudeen has said.After falling over 20 per cent during January to July period in 2015, sugar prices have climbed around 25 per cent over the past two months. According to market experts, erratic monsoon rains in the major sugarcane producing states in India contributed to sugar price surge in the recent past.The importers will have to curtail their imports as they cannot bear the loss due to the price hike in the Indian market, wholesale traders said, adding that the government should remove the price control to prevent a scarcity of sugar in the market soon.