Food-in-the-mouth

Has Bandula Gunawardena, Minister of Trade, Marketing Development and Consumer Affairs, put his food … (oops) foot in the mouth?

His grand plan scheduled for March to bring down rising prices of essential commodities appears to be falling apart – even before it was enforced!

Gunawardena, who claimed that inflation was rising just a few months ago when he was batting for the opposition and blamed the Central Bank for economic woes, spoke with more confidence on inflation in his new incarnation after he switched sides.

Two weeks ago the minister got cracking on a plan to cut prices of essential food which drew criticism that a few importers would benefit from the lopsided move.

The plan virtually collapsed on Thursday when the Essential Food Commodities Importers and Traders Association said they would be forced to increase prices as a ‘duty waiver’ had been lifted.

The group said a duty waiver in force from December 1, 2006 to February 15, 2007 had lapsed and was not extended forcing them to raise prices. There are many questions however from this statement. For example there was no mention when the minister’s plan was unveiled that some importers enjoy a duty waiver on essential commodities.

The minister, ministry officials and importers didn’t raise this issue at all. It’s unclear whether they conveniently kept quiet or blissfully forget to mention this.

For if this was in the public domain at the time, the simple answer to bring down prices was to extend the duty waiver that was lapsing on February 15 for whatever period that the new deal is to be in force.

However that would also have meant a few importers benefiting – which is the way Minister Gunawardene’s plan was to unfold.
When first announced, the proposal – though denied by the Ministry – was to select a few importers and provide a duty waiver to those who provide the lowest prices. That miffed the trade and when the media raised a hue and a cry, it was explained that the concession would be available to anyone prepared to sell under a pricing mechanism.

However all this while, few people apart from the trade and the ministry were aware that a duty waiver already existed and was due to lapse on February 15.

When the group of importers last week attempted to clear their consignment after February 15, they were told by Customs that the duty now existed. Importers say they were surprised and only two days later were informed by the Treasury that the duty waiver won’t be extended.

Why were new consignments arranged with the duty waiver in mind when the importers very well knew the concession was lapsing, and all the shipments were arriving after this period? One can assume – some importers confirm this – that the minister had assured that he would ensure the waiver is continued from February 15 till the end of the month. Thereafter a new waiver was to come into place for the new plan to take effect.

When traders complained to the minister that he hadn’t kept to his promise, his response was to pay the duty and enjoy the concession once the plan became effective from March 1. But traders are not buying the latest promise – saying the plan has backfired and the Treasury is unlikely to provide a new waiver next week.

Last week irate traders said the import policy came at a time when pulses and other crops are ready for harvest in India – a time when prices fall, and that it was disadvantageous to fix prices during a period when prices are already seen falling. It would be interesting to see what trick in the book the minister would use to wriggle out of this mess – and still want to be seen as the nice guy!