Sri Lanka rice millers refuse to sell at controlled prices

ECONOMYNEXT – Sri Lanka’s rice millers have refused to sell rice at rates dictated by the state price control authority and are asking for higher prices.

Sri Lanka’s Consumer Affairs Authority, the agency that slaps price controls on anything from hoppers to a cup of tea, issued controlled prices of Rs80 for a kilogram of Samba rice, Rs72 for Nadu (a parboiled rice) and Rs70 for Kekulu (raw rice), exposing the flaws of Sri Lanka’s economic policies to the world.

Sri Lanka’s rice prices surged after the drought due to import taxes blocking foreign rice from entering the country.

The millers wanted a price of Rs90 for a kilo of Samba, Rs87 for Nadu and Rs80 for Red Raw.

Sri Lanka’s Daily Mirror newspaper said the call for higher prices was issued following a meeting in Polonnaruwa with about 120 rice processors. They came from Polonnaruwa, Anuradhapura, Marandagahamula, Kekirawa, Kantale, Nikaweratiya, Anamaduwa and Tissamaharama. Rice millers wanted a meeting with President Sirisena.

Unlike small shopkeepers who are dragged to court by the Consumer Affairs Authority, large millers have political clout.

Among the largest rice millers is Dudley Sirisena, brother of President Maithripala Sirisena.

Most millers who bought rice last year had acquired them at lower prices. Millers have also been given credit from state banks in the past to buy rice.

But millers also have to maintain warehouses to store rice for long periods. At state warehouses, rice deteriorate quickly and is sold as animal feed.

Somewhat higher rice prices now could potentially allow millers to buy rice at the upcoming Maha season paddy (rough rice) at higher prices, giving higher incomes to farmers, many of whom grew lower volumes of rice.

However, many farmers had crops destroyed or did not grow rice this season at all.

Meanwhile, in an unusual move, which is not expected of the current administration that has acquired a reputation for policy blunders including price controls, the finance ministry cut the import tax on rice to Rs5 a kilo from Rs15, allowing foreign rice to come in.

Finance Minister Ravi Karunanayake said anyone could import rice and government agencies would stay out of the market.

Analysts say a regular flow of foreign rice can stabilise prices regardless of whether local millers sell or not. (Colombo/Feb13/2017)