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Opposition warns of a Rice Crisis because of price controls and cooperative shutdown

ECONOMYNEXT – Opposition politician Dr Harsha de Silva is saying that the government’s strategy of imposing price controls on rice and dismantling the cooperative of small rice millers will create a crisis in the market.

Addressing a press conference at the office of the Samagi Jana Balavegaya in Kotte today, de Silva said the cooperative that produced the “Shakthi” branded rice at a low price has been ordered shut.

The former minister said that “the Cooperative System in Sri Lanka has been politicized, but it is not a bad word. Many very succesfull enterprises in other parts of the world are cooperatives,” he said.

He said that as Non Cabinet Minister of Economic Reforms and Public Distribution in the past government the cooperative had been set up to increase competition in milled rice and help the small and medium scale millers.

Sri Lanka’s domestic rice market is dominated by a handful of large scale millers and marketers commonly referred to as the “Rice Mafia.”

De Silva claims that the Shakthi brand although small in comparison kept prices reasonable consumers had a choice at the supermarkets.

He also claims that the small scale millers were failing and unable to pay back their bank loans and this was a solution to that problem.

He also said that prices of the popular types of rice were stable around the Rs 80 to Rs 85 per kilogram.

De Silva alleges that the new government had distributed around 42,000 tons of rice the government had been holding as a buffer stock to “various people.”

Thereafter, he said the retail prices of rice began to rise from around Rs 80 a kilo to a hundred.

In December the government slapped price controls forcing retailers to sell at a maximum of Rs 98.

After the Maha season when the country reaps the biggest rice and vegetable harvest the government purchased around 25,000 metric tons of rice, about half of what it should get during normal times.

The government also raised the guaranteed price the farmer could get at the farm-gate for rice

Consequently because of rising prices of the country’s staple the current government imposed price controls on the popular types of rice, forcibly lowering prices of Samba and Nadu from around Rs 98 a kilogram to Rs 90.

The millers found that selling at that price causes them losses and hiked up pricier types such as Keeri Samba and compelled wholesalers to buy a quantity of the more expensive commodity to make up the losses suffered by the controlled price.

“Although the government has issued the gazette, that rice does not exist in the market place,” de Silva said.

But by then the big time millers had bought and stored large quantities of Paddy which they had bought previously for a very low price of Rs 47 per kg as against the government guaranteed price of Rs 57, de Silva claimed.

“So we are asking the question where is this Paddy that has been bought at a low price?”

A few days ago the Consumer Protection Authority inspected the premises of some of the biggest millers in the country accompanied by armed guards.

They were looking for the missing rice, officials said. (Colombo, May 26, 2020)

Reported by Arjuna Ranawana