Sri Lanka to cut wheat flour import duty to relax oligopoly as rice prices spike

ECONOMYNEXT – Sri Lanka will cut import taxes to temporarily break a wheat milling and duopoly and bring prices down, as rice prices spiked, cabinet spokesman Minister Ramesh Pathirana said.

“The cabinet decided to cut import duties on wheat flour temporarily to keep prices down in the festival season,” Minister Pathirana said.

“This will break the monopoly on wheat flour.”

Sri Lanka has a government sponsored duopoly on wheat flour high maintained by a high tax on wheat flour and a by a lower tax on wheat grain to give high profits (rents) to a milling oligopoly and block a free market in wheat.

Wheat grain has a general duty of 15 percent, while milled flour is taxed at 30 percent.

Minister Pathirana said a gazette notice on the new import tax will be issued shortly.

It is not clear for how long the duopoly would be broken and when it will be re-instated.

“Our stance is that there should not be a monopoly on any essential food,” Minister Dulles Akahapperuma said.

The high prices on wheat flour has also generated the background for an oligopoly of rice millers to keep rice prices high.

Rice prices rose sharply over the last month, with several large millers, who store most of the rice paddy in the country, raising retail prices of their branded rice.

Opposition politicians have charged that the blocking of un-husked paddy from government stores to small millers had pushed up prices.

The government hoped to quickly release 42,000 metric tonnes of stored rice to millers.

Pathirana said the government hoped to keep retail rice prices at 99 rupee a kilogram.

Rice prices soared from around 85 to 90 rupees a kilogram at the beginning of November to over 110 rupees by the first week of December. (Colombo/Dec12/2019 – Update II)