ECONOMYNEXT – Sri Lanka’s will mandate separate prices for domestic and imported rice following a decision by President Maithripala Sirisena, Finance Minister Ravi Karunanayake told reporters in the latest twist in the island’s price control saga.
Sri Lanka’s Consumer Affairs Authority mandated prices of Rs80 for a kilogram of Samba rice, Rs72 for Nadu (a parboiled rice) and Rs70 for Kekulu (raw rice).
Sri Lanka’s rice millers had refused to sell rice at the ceiling set by Sri Lanka’s price control authority and sought a meeting with President Sirisena, whose brother is also a top rice miller.
The decision was made at a meeting where Minister P Harison and Rishard Bathiudeen was also present Karunanayake said.
Karunanayake said the President had practical knowledge in such matters, and if problems crop, such as selling imported rice at prices set for domestic rice as alleged by some, they could be dealt with.
Some rice millers have built brands and it would be possible for branded millers to sell rice at higher than he basic commodity price, economic analysts say.
Sri Lanka’s rice prices rose after a drought hit crop in the current growing season, but Finance Minister Ravi Karunanayake had already cut import taxes to Rs5 a kilo, which would ensure the free flow of rice, and eventually reduce prices.
Rice is still being sold at higher-than-controlled prices as foreign supplies keep coming in.
Higher prices would incentivise importers and make people eat close substitutes such as wheat flour, automatically clearing the market and eliminating shortages.
If controlled prices are strictly enforced, black markets and shortages will occur as elementary economic students know.