ECONOMYNEXT – Sri Lanka’s Consumer Affairs Authority (CAA) has withdrawn a maximum retail price on bottled water after the several water bottle manufacturers closed down operations.
CAA chairman Major General Shantha Dissanayake in an extraordinary gazette issued on Friday (28) rescinded the previous order issued in 2018 to impose the maximum retail prices.
The CAA imposed the maximum retail price on September 28, 2018 with 500 ml bottle to be priced at Rs.35, 1 litre at Rs.50, and 5 litre at Rs.150.
However, industry sources said several small players who were depending on plastic pellets imports for bottles were compelled to close their business in the face of an import ban, expensive raw materials locally and a lack of adequate dollars to buy the plastic.
“Prices of all inputs including transport cost, fuel, and plastic has risen significantly and the industry has suffered a lot,” a industry official who works in a large scale private water bottle company told EconomyNext.
“Many small players have already closed down their operations after they could not get bottles at cheaper price. Even for big players, the margins shrank sharply.”
“As far as I know, out of 300 water manufacturers, several small-scale companies have closed down due to this issue.”
Sri Lanka’s excess money printing that has created dollar shortage and central bank’s stubborn foreign exchange policy that has created a black market for US dollars at 20 percent higher than then its rate have already hit many businesses that have import components.
The central bank has also banned imports to preserve dollars to repay foreign loans. However, its excess money printing to keep the local borrowing cost artificially low has led to much higher import bill in 2021 than a year ago.
Many importers say their foreign suppliers have stopped proving the raw materials because local banks have not allowed them to open foreign letter of credit (LC) to pay their overseas supplier amid dollar shortage.
The CAA was forced to withdraw its price controls over rice, sugar, and many other essentials after its controls created the shortage last year which prompted Consumer Affairs Minister Lasantha Alagiyawanna to ask apology from the public for creating shortages.