16th April 2000

Jaffna's trade mafia

By Chris Kamalendran

As residents are hit by sky-rocketing prices, monopoly vultures, bureaucrats gobble millions

More than four years after the northern Jaffna peninsula was brought under the control of the security forces, residents there still face untold hardships amidst a devastating war and the sky-rocketing cost of living.

Yes, the war has contributed to the high prices of food and other items.

Goods are sent to Jaffna by ship in the absence of a land route owing to the war in the north. The high transport cost is often cited as a reason for high cost of goods. But an investigation by The Sunday Times reveals a different story — the prices are artificially jacked up by some government officials who allegedly work hand in glove with a traders' mafia.

These handful of traders and officials, it is alleged, manipulate the prices and make millions in profit.

For instance, potatoes which are much in demand during the National New Year season, was sold at Rs. 140 a kilo whereas its price in Colombo and elsewhere was Rs. 24.

Our investigations have revealed that it was not merely security reasons that kept the prices high, but it was certain bureaucrats linked to the traders' mafia that made the Jaffna resident to pay the unreasonable high price. These traders operate as a cartel — a virtual monopoly — which does not allow others to enter the market and thereby bring down the prices. The end result is suffering for Jaffna's 400,000 residents.

No matter whether a trader in Colombo has Defence Ministry clearance for the shipment of goods to Jaffna, it appears that it is this cartel which has the final say. With the help of a top government official, they are alleged to be allowing only their agents to send goods from Colombo.

Recently about 12 Colombo-based businessmen with links in Jaffna were deprived of sending potatoes to the north a few days ahead of the National New Year.

The traders say they had the necessary documents, including the Trade Ministry approval and the Defence Ministry clearance. They had even reserved space in the ship.

The ship 'Mercs Kandy' was scheduled to leave the Colombo port on April 10 and the traders had the lorries loaded with huge quantities of potatoes. But at the last moment, the shipping agent told them that potatoes would not be allowed on the ship.

Trader T. Maheshwaran said the shipping agent told them that he had received instructions from Jaffna's Government Agent K. Shanmuganathan that potatoes could not be shipped to Jaffna as there were ample stocks.

"My lorries packed with 2000 bags of potatoes were waiting at the harbour for loading from Saturday night. We cannot understand why potatoes were being sold at Rs. 140 if there were ample stocks in Jaffna," he said.

The traders unable to send the consignment to Jaffna suffered severe losses and they had to hurriedly make arrangements to sell them in Colombo ahead of the New Year.

The disappointed traders then decided to complain to the Commissioner General of Essential Services who comes under the Presidential Secretariat and to naval authorities and the shipping company.

Commissioner N.A. Obadage acting on the instructions of the newly appointed Minister of Northern Region Rehabilitation and Development, Sarath Amunugama, wrote to the shipping company, Mercantile Shipping Company Limited, with copies to the Navy and the Trade Ministry, seeking clarification for not accommodating the potato consignment.

In his letter, Mr. Obadage pointed out that permission had been granted for this particular stock to meet the increased demand during the new year season.

"I am now informed that transport of potatoes to Jaffna are being prevented on false information given to naval authorities that there were ample stocks of potatoes in Jaffna," the letter said.

Apparently perturbed over the phrase 'false information', the Navy promptly reacted. The Commander Western Naval Area, Rear Admiral A.H.M. Razeek, in a letter to the Commissioner General of Essential Services said it was a matter between the Jaffna GA and the relevant ministries concerned. The Navy comes into the scene only to do a check and give the final clearance.

The Colombo traders alleged that the Jaffna cartel buys potatoes also from farmers there at a low price and hoard them, creating an artificial scarcity and selling them later at higher prices.

When The Sunday Times contacted Jaffna GA Shanmuganathan, he admitted that he had asked Colombo to stop sending potatoes as ample stocks were available in the Jaffna peninsula.

He said this decision was taken at the District Agriculture Co-ordinating Committee meeting to protect northern potato farmers.

However, a spokesman for the Traders Association in Jaffna denied this claim.

"If stocks are available the price of a kilo of potato cannot be as high as Rs. 140. The harvest was in February and the next harvest is in December. At the moment there isn't sufficient supplies," he said.

Trade Ministry official S.C. Mannapperuma when contacted by The Sunday Times regarding the allegations about the potato supplies to Jaffna said that the matter was being probed following a directive given by Minister Amunugama.

It is not only the potato prices, but also the prices of other food items, material required for rehabilitation, cement and liquor are manipulated by the mafia, it is alleged.

The Colombo traders claim that even in sending other items to Jaffna, similar problems arise with a certain company being treated favourably by Jaffna bureaucrats.

The price of a 50 kg bag of cement which is sold at Rs. 235 fetches Rs. 525 in Jaffna.

The traders claim that the monopoly was the main reason for the high price. They say about 85 percent of Jaffna's monthly requirement of more than 25,000 bags of cement are supplied by one trader while the rest is sent by the Building Materials Corporation.

This particular trader's cement is sent by a ship chartered by the Jaffna GA. Other traders ask why cannot the GA charter another ship to send their cement. The entire operation, they allege, is a move or manoeuvre which allows only one trader to make profits while the others are shut out of the Jaffna market.

The traders claimed that the price of a bag of cement could be brought down if fair competition is allowed.

In a related development, the requirements of some 22 co-operative societies are being met by another trader in Colombo — another monopoly case. The Sunday Times learns that the trader has continued this monopoly for the past two years.

"If other traders are allowed to supply items to the cooperative societies in Jaffna, prices will automatically come down. It is because of the monopoly that the civilians have to pay high prices. It is not because of the war that the people are suffering," a Jaffna trader based in Colombo said.

According to traders, liquor supplies to Jaffna also has been restricted to one supplier resulting in high prices.

The traders claim that Palmyrah Arrack produced in Jaffna by the 'Thikkam Distillery' is sold at Rs. 200 a bottle, both within the peninsula and in Colombo — no difference in prices. But arrack sent from Colombo is sold in Jaffna at double the price in Colombo.

The Sunday Times investigations also revealed that another reason for high prices is that traders have to pay high labour charges during loading or unloading .The traders are charged Rs. 250 for per metric ton of cargo, but the labourers are paid about Rs. 60 per metric ton.

Traders estimate that unloading of cargo from each ship will cost Rs. 1.7 million as labour charges. But if effect, the labourers get Rs. 330,000.

The traders say they are highly suspicious about the receipt issued to them at the Point Pedro jetty where the loading and unloading take place. The receipt is just a paper with only a rubber stamp of the District Revenue Collection Centre which comes under the Jaffna GA's office.

One such receipt had been issued to collect Rs. 426,610 from one of the traders who loaded a stock of tobacco and red onions to Colombo. (See montage). The traders also claim they are compelled to pay Rs 200 a lorry for a government employee who escorts the lorry after security clearance is given.

The Jaffna GA denied allegations made by the traders about certain businesspersons having a monopoly in potato, cement and liquor businesses.

He said the cement prices were high as the cost of transport to Jaffna was high.

But traders and Jaffna residents disagree. They say if the government was really interested in the welfare of the people in the north, it should probe the allegations and allow free trade competition to bring the prices down in the Jaffna peninsula. They also say a monopoly situation exists even in shipping. They urge the government to allow more shipping companies to transport goods to Jaffna. These unhealthy trade practices should end, they say.

Inside the glass house

Editorial/ Opinion Contents