Sri Lanka slams more price controls mocking ‘social market economy’
ECONOMYNEXT- Sri Lanka has slammed a series of price controls amid money printing and currency depreciation, making a mockery of a claim by the island’s new administration to create a ‘social market economy’.
Sri Lanka’s Consumer Affairs Authority has already slammed price control of 10 rupees on hoppers making ‘legal’ hoppers smaller while ‘illegal’ better quality hoppers continue to be sold in the ‘blackmarket’ at higher prices.
When price controls are placed, traders and producers will also sell at the highest price possible price even when costs fall.
Price controls on cement placed when clinker prices went up, prevented prices from falling later when global clinker prices fell, as importers and manufacturers continued to sell at the ‘controlled’ price of 930 rupees a 50 kilo bag.
The Trade Ministry has slammed price controls on items which were not controlled even during the ousted Rajapaksa regime.
The new price controls undermining markets come hot on the heels of a policy statement by Prime Minister Ranil Wickremesinghe barely two weeks ago, who sought to calm entrepreneurs that it the new regime would follow a ‘social market economy."
Price controls from the trade ministry are a key signal that the administration may not be serious about running a market economy as promised earlier or that there is no policy cohesiveness in the coalition government with the Trade Ministry actively undermining the promise of a ‘social market economy’.
The new price controls may also signal that the original economic platform may now have been modified to a ‘social market economy with price controls’
The Ministry of Trade said price controls have bene introduced for the first time in a number of goods.
A series of price controls were also introduced shortly after the new administration came into power in January, which also went beyond the controls established by the ousted Rajapaksa administration.
The new controls includs Masoor Dhal (at 190 rupees per kilo), Potatoes (145 rupees per kilo) and Big Onion (155 rupees per kilo).
Big Onions were around 120 to 130 rupees a kilo when the new regime came to power in January.
Poultry firms could earlier price value added chicken without skin based on market demand, but the trade ministry had blocked it now. Chicken Meat (whole chicken- Without skin- 480 rupees per kilo) was gazetted at 480 rupees.
The price controls come as poultry firms said demand for chicken is rising. The government has printed money to pay salaries of state workers, and demand for protein usually go up when that happens.
Both balance of payments troubles and rising prices of ‘non-traded’ goods are standard consequences of money printing.
Packetted Wheat Flour (95 rupees per kilo), and Dried Chillies (355 rupees per kilo) have also been brought under price controls.
The new price controls come as the rupee continues to fall, triggered by money printed to pay state worker salaries. Since the new administration came to office the rupee has fallen from 131 to 142 to the US dollar.
The trade ministry had previously slammed price controls on un-packetted white sugar at 87 rupees per kilo), packetted white sugar (at 95 rupees per kilo), un-packetted wheat flour (87 rupees).
Canned fish net weight 425g-drained weight 280g (140 rupees), and canned fish net weight 155g-drained weight 105g (gazetted price, still at 70 rupees).
Micro management of prices by the Consumer Affairs Authority was also taking place.
Three other items for which small price increments are introduced are chicken meat whole chicken with skin (increased by 20 rupees from gazetted price of 380 rupees per kilo to 400 rupees), imported.
Unpacketted dried sprats (increased by 25 rupees from gazetted price of 385 rupees to 410), and imported, packetted dried sprats (increased by 5 rupees from gazetted price of 425 per kilo to 430 rupees). (Colombo/Nov19/2015).