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Upfront import bills will cripple us, say appliance retailers
The Government’s clampdown on imports in demanding a 100 percent cash deposit when opening letters of credit (LC) will result in the collapse of the electrical and electronic appliances import industry, stakeholders claimed.
The Sri Lanka Retailers Association (SLRA) has asked the Government to remove the new requirement, saying if the policy remained for long many importers would have to close shop and lay off employees during these difficult times.
The industry provides around 50,000 direct and indirect jobs.
Some electronic items such as mobile phones cannot be labelled as luxury items, say retailers, noting that the price hike will hit the poor hardest
Also, as prices increase and demand falls, several companies will have to restrict expansion plans, SLRA Assistant Secretary Dinesh Perera said.
His comments follow the Central Bank’s directive to all licensed commercial banks to freeze credit to importers of specific goods to meet minimum cash deposits for imports.
The list consists of 623 items considered non-essential or non-urgent goods, including electrical and electronic products, food, clothing, perfumes, cosmetics, food products and toiletries.
Any importer wishing to import such items will have to pay cash upfront when opening letters of credit (LCs).
The SLRA said that this would “severely” affect importers’ cash flow.
Mr. Perera said it was normal practice for importers to receive 120 to 180 days’ credit on LCs from suppliers and having to pay upfront deprived them of this facility.
Even if importers were ready to pay cash upfront there is a delay in obtaining US dollars because of the shortage of dollars in local banks, he said.
“We have to line up on the waiting list for weeks, for dollars while the dollar rate goes up even further,” Mr. Perera said.
Last month, although the Central Bank exchange rate stood at Rs. 203 to the dollar, importers said they had to pay Rs. 240 to Rs. 245 for a dollar.
Housewives and students will be greatly affected by this move as mobile phones, tabs, televisions, refrigerators and washing machines will rise in price.
During the pandemic lockdown smartphones have become useful for children taking online classes while households used smartphones to pay utility and other bills and check bank balances without stepping out of their homes.
“These have become essential goods and cannot be considered luxury items,” Mr. Perera said, noting that the price hike will hit the poor hardest.
Business experts said having to pay cash upfront for imports meant it would be difficult for retailers to continue the practice of selling goods on hire purchase to monthly wage-earners.
The Association of Consumer Electronics Appliances said the Government ‘s directive was a big blow.
A member who wished to be anonymous said all retail outlets had suffered a downturn in sales during lockdown.
“We were closed most of the time in the last three months beginning in July, and are closed for the entire month of September. We are already struggling and now this,” he lamented.
The lockdown has also rendered it difficult to collect payments because of restrictions in movement.
Meanwhile, demand for electrical and electronic items has skyrocketed with many people vying to lay their hands on coveted items they had been wanting to buy for a long time.
Retail shops were inundated with inquiries and orders online last week despite the items having already increased in price by 25 percent.
Retailers claimed the price rises were due to freight changes and the rupee’s depreciation but the SLRA said costs should only have risen by 7-10 percent.
Customers have been warned of a further increase in prices or non-availability of goods in the near future.