News
Cost of living takes off to space: Price controls lifted, window dressing by market players
Long queue at Madurankuliya in Puttalam.Pic by Hiran Priyankara
The lifting of the price control on essential items including cement, gas, sugar and chicken by the Consumer Affairs Authority (CAA) has resulted in an unprecedented increase in prices with market players deciding on the figure.
The CAA, the regulator of the essential goods price index, justified the price increases and said price controls had been lifted on many items.
The sugar price has shot up to about Rs. 200 a kilo from its controlled price of Rs. 122 last week and chicken was being sold at Rs. 750 a kilo, a jump of Rs. 250 on a kilo.
The Poultry Association said the cost of production, including the price of poultry feed, transport after the fuel price hike and other expenses had shot up.
The association’s Former Chairman Mathalie Jayasekara said there could be further price increases because the prices were increasing after the 2022 Budget was presented.
Meanwhile even though the CAA gave approval for a big increase in the price of cooking gas, a shortage persists with long queues seen outside distribution outlets selling cylinders of gas. Many returned home empty handed or after finding alternatives including firewood and kerosene for cooking.
However kerosene was also not available with housewives lamenting they often find it difficult to cook a proper meal for their children.
Litro Gas, the predominant cooking gas provider to the market, said the gas shortage was caused by its inability to clear its consignment from the port.
“There was a four day delay last week. This has exhausted the buffer stock and has caused the shortage,” Litro Gas Marketing Manager Janaka Pathiratne said.
He said he believed the supply would be normal within the next ten days.
Meanwhile the worst hit was the construction industry with many building operations stalled because of the lack of cement.
Builders complained that the rising cost of cement would make it too costly for them to complete the contracts already undertaken.
The local cement price last week shot up to Rs.1600 for a 50 kilo bag, with contractors complaining it would not be possible to profitably complete ongoing contracts.
Sri Lanka’s National Construction Association said a 50 kilo bag of local cement had a tag saying the price was Rs. 1275, but hardware were selling the cement bags at Rs. 1600.
Chairperson Susantha Liyanarachchi said middle men were buying up most of the local cement, creating an artificial shortage with the price being decided by the market demand.
Sri Lanka’s regular requirement of cement was estimated at around seven million metric tonnes a year, with 30% manufactured locally and 70% imported.
However there was a scarcity of imported cement because of the shortage of dollars in the local banks. This has pushed up the demand for local cement with bigger players buying up most of the stocks.
This has also prompted the construction industry regulator, the Construction Industry Development Authority (CIDA), to allow the price of cement to float.
CIDA Director Suvindra Amarasekera said it was futile publishing the price index in its monthly bulletin, as cement was not available with local manufacturers.
As such he said a decision had been taken not to mention the market price of cement until the price stabilised.
Currently a 50 kilo bag was being sold at Rs. 1500 to Rs. 1600 from the earlier price of Rs. 1275.
Industry sources said the price fluctuation was being caused by the scarcity of the “green buck” and the increase in shipping charges due to pandemic restrictions in ports.
Following this, last week construction industry officials met the Finance Minister Basil Rajapaksa to discuss the crisis, and he gave an assurance to take steps to stabilise the price.
Accordingly the Government agreed added 19 new cement importers to the fray. This was expected to increase competition and stabilise market prices.
However market sources question the expediency of the move when dollars were not available for regular imports.
“This will only increase the demand for the “green buck”,” one importer said.
Industry sources also said the Finance Ministry had failed to grant relief to the besieged industry.
Under the CIDA Act section 53 and 54 the Government should allow contractors to charge higher prices from customers because of the increase in the price of cement. This would apply only to ongoing contracts.
“About 70% of our cement is being imported and we need to get our relief,” Mr. Liyanarachchi said.
CIDA Chairman, Retired Major General D. M. S. Dissanayake, refused to comment further and said he was busy at a meeting.
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