ECONOMYNEXT – Sri Lanka’s price control agency will probe the stocks of large millers Trade Minister Nalin Fernando told parliament after complaints that Keeri Samba, premium domestic rice, had disappeared from supermarket shelves.
“I went to a supermarket to buy Keeri Samba yesterday,” opposition legislator Dayasiri Jayasekera told parliament on September 05.
“But it was not available. Today there is no Keeri Samba in Colombo city. I looked at three or four places. I am asking why is this, from you as the trade minister.”
Goods usually go off the shelf and black markets are created due to government price controls, which prevents a market clearing price from being established.
“There is a controlled price for Keeri Samba of 260 rupees (a kilogram), “ Trade Minister Nalin Fernando replied.
“By today when Keeri Samba prices are to rise to 280 to 285 (rupees a kilo) the Consumer Affairs Authority will take steps to raid them. That is the what is happening.”
The CAA had earlier made eggs, tinned fish, dhaal, disappear, wheat flour, from shelves with its price controls and bankrupted layer chicken farmers.
Sri Lanka has an additional economic control in the form of import controls, which also allows large millers to control prices with the state controlling the food access of the public to give extra profits to farmers and millers.
Imports are controlled partly to ‘save foreign exchange’ as the central bank has a habit of printing money to cut rates triggering forex shortages.
Fernando said at the moment only ‘Basmati’, a premium long grain rice used by tourists, is being imported and other rice imports are curbed.
“The large millers have big stocks of rice,” Fernando said. “They can sell below 260 rupees. We know that the large millers in times like these take action to get higher prices from consumers.
“If it went to farmers the consumers would have been fine. But it is not going to the farmers. So in the next few weeks we will take some steps.”
Classical economists describe this problem as unintended consequences of state interventions.
One state intervention to give a special privilege to one set of economic players may require two or more interventions to solve negative fallouts.
Sri Lanka’s agriculture minister has been recently talking up rice prices, pointing at the dry weather, though crop damage in the Yala season is expected to be about 5 percent and domestic rice surplus is expected.(Colombo/Sept06/2023)