Sri Lanka price controls causing milk shortages; minister responds with pork tales

ECONOMYNEXT – A milk powder shortage is emerging in Sri Lanka, a legislator warned as price controls hit suppliers, while a deputy minister hit back with allegations that companies are selling milk powder with replaced pork fat.

Deputy Minister of Industry and Commerce Buddika Pathirana told parliament said he had received complaints of milk powder being sold in Sri Lanka with milk fat replaced by pork fat, generating an outcry among other legislators.

He was responding to a query by a Janatha Vimukthi Peramuna legislator, who said milk powder shortages were emerging in the country and whether any taxes on domestically produced milk powder could be reduced.

Sri Lanka has imposed price controls on milk powder, and importers have said they cannot import and sell the product after the currency fell as the Central Bank tried to defy a phenomenon economists call the ‘impossible trinity’ of monetary policy objectives.

Price controls automatically lead to shortages as well as black markets. Students learn this when they study supply and demand, a basic economic principle. Shortages and black markets were widespread in Sri Lanka in the 1970s under policies adopted by then Prime Minister Sirimavo Bandaranaike.

The economy was liberalized in 1977, which ended these phenomena. However, price controls were revised later when Bandula Gunewardene, a former economics teacher, headed the commerce ministry.

Deputy Minister Pathirana, said a cost-of-living committee will review milk powder prices and make a decision.

Sri Lanka’s Consumer Protection Authority (CAA) is the country’s main price control agency.

Pathirana said he had received complaints that milk powder companies were selling products where milk powder was replaced by pork fat.

He said there were claims that milk fat had been replaced by vegetable fat. In 1992, a gazette had defined what a milk powder should be, he said.

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It was not clear whether he was referring to full cream milk powder or so-called ‘creamers’ and ‘non-dairy creamers’, which are labeled as such.

Pathirana said the CAA had contracted a local laboratory to carry out tests, but it had suddenly refused to do so, raising concerns that it had been bribed by importers.

He had instructed the CAA to engage a foreign laboratory to carry out the tests. Legislator S Marikkar said Deputy Minister Pathirana’s claim was a serious one and Muslims in particular did not want to consume port fat.

Deputy Minister Pathirana claimed in parliament that New Zealand was exporting more milk to Sri Lanka than could be taken out of milch cows, pregnant cows, heifers and new born calves in the country.

He did not mention specific numbers to back up the claim, or where he got the data.

According to Sri Lanka’s statistics office, 93,253 metric tonnes of milk powder had been imported to Sri Lanka in 2017.

Data reported by Dairy New Zealand, an industry body, country’s farms had produced 20.724 billion litres of milk in the year 2017/2018, up from 20.702 billion litres in 2016/2017.

Dairy companies had processed 1.84 billion kilograms of milk solids in 2017/2018, down from 1.85 billion kilograms in 2016/2017.

The country had 4.992 million cows in 2017/2018, up from 4.861 in 2016/2018. (Colombo/Feb06/2019 – Update II – SB)

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