Demand for fresh milk seen rising in Sri Lanka
Faced with shrinking or static demand for branded milk powder, Sri Lanka's milk industry is setting its sights on achieving growth in fresh liquid milk where demand is seen rising.

"That's where growth will come - in fresh milk," says Mathew Oldham, managing director at New Zealand Milk Lanka (Pvt) Ltd, marketers of Anchor and the Newdale range of fresh milk products.

The company, gearing its relatively new fresh milk facility at Biyagama to meet growing demand for fresh milk, says it plans to introduce a range of new products in the market this year but Oldham declined to give details.

Oldham, in a recent interview, also said they were opposed to government plans to raise milk powder duties to boost local milk production and demand, noting that it would result in a negative impact on consumer prices.

Some countries in the world have increased duties on imports to protect the local industry. "The result is that the industry will grow inefficiently and at the end of the day the consumer would be paying more for fresh milk than before," he said, responding to comments some weeks back by Livestock Minister S.B. Dissanayake on plans to raise milk import duties to boost local milk production.

According to official figures, total powdered milk consumption in Sri Lanka fell to 48,100 tonnes in 2000/01 (March to April) from 48,400 tonnes in the previous financial year after consumption levels rose from 42,400 tonnes in 1995/96, 43,500 tonnes in 1996/97, 47,100 in 1997/98 and 45,400 in 1998/99. Trade sources attributed declining trends in powdered milk consumption to a slight shift to fresh milk.

New agriculture policy is being formulated
By Naomi Gunasekera
The government is working on a national policy on agriculture that will balance the interests of producers and consumers, Minister of Commerce and Consumer Affairs Ravi Karunanayake said.

"I have a twin problem. One is ensuring that the domestic industry does not get wiped out and the other is ensuring that the consumer gets a decent rate (price)," he said in an interview (see Tackling MNCs and consumer needs)

Following talks between Prime Minister Ranil Wickremesinghe, Agriculture Minister S.B. Dissanayake and himself, a national policy is being worked out and will be announced soon, Karunanayake said.

Giving an example of the dilemma facing the government, he said that it could import and sell potatoes at Rs. 35 but local producers sell at Rs. 50.

"Are we going to cut off the local producer or are we going to protect him?" he asked.

The danger of not protecting local producers was that prices of imports would rise with the depreciation of the rupee or that shipments could be disrupted by external events such as a war, he said.

"That is where the balance is required and we thought of considering the equitable return to the farmer in deciding on the prices," he said.

Karunanayake also said state outlets such as Sathosa and Salu Sala would be revamped and made more customer-friendly but not privatised. A new subsidiary called Sathosa Retail will be formed linking all retail outlets.

Salu Sala, which he described as a "defunct company", will be converted and made to compete with the likes of Odel and House of Fashions to serve consumers better, he said.

Promises to IMF
Govt. to freeze wages, raise prices
The government has promised the International Monetary Fund (IMF) it would freeze private sector wages and hiring while raising administered prices and closing several public institutions.

The pledges were contained in a revised Letter of Intent to the IMF sent just before the lending agency last week announced the resumption of disbursements under the standby loan facility that was suspended after the former regime failed to keep to IMF-dictated performance targets.

"As part of our medium-term strategy, efforts will be made to reduce the wage and pension bill from 2003," said the letter signed by Finance Minister K.N. Choksy and Central Bank Governor A.S. Jayawardena. Indicating that the state sector will layoff staff on a large scale, they have said: "Every department and agency will be required to rationalise their cadre significantly over the next three years, starting with the elimination of vacant positions, and to consolidate functions."

For this year, the government has set aside Rs. 102 billion to finance one-off expenses from this consolidation and rationalisation of functions within the government, said the letter which spells out what the United National Party-led government intends to do to get money from the IMF.

With expenditure control being "a key pillar of fiscal policy in the 2002 Budget", the government promised the IMF to raise postal tariffs and "adjust other administered prices as necessary."

The inflation target for the year has been raised to 7-8 percent, from the five percent in the original programme, because of "the need to further increase the administered price of several key items."

The letter also said: "We also intend to achieve savings by closing a number of redundant public institutions."

It also promised that labour market reform is being initiated with the introduction of strict time limits for the processing by the Labour Commissioner of dispute resolution, arbitration, and termination cases.

"These efforts to reduce delays will be linked to the establishment of a binding formula for compensation of terminated employees," it said. It pledged "more decisive" reforms of the two state banks, Bank of Ceylon and People's Bank.

"The government is considering the options for deepening state bank reform," it said. "Options for more decisive reform of these institutions are being considered."

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