Markets manipulated by trade cartels

by Gamini Warushamana

Director (Price) of the Department of Census and Statistics D.C.A. Gunasekara said that there was a wide gap between retail and wholesale prices.

The mark-up of the locally produced agricultural products specially is extremely high, he said. According to statistics, the average retail price to the producer price margin of vegetable in Colombo market was between 257%-82% in the first quarter of the 2006. For rice it was 44%-32%, green gram 74%, potatoes 38%, lime 142%, coconuts 26% and fish 123%-26%.

Gunasekara said that Colombo markets are not competitive and they are manipulated by cartels of traders and therefore the prices are stipulated and not competitive. The price division of the DCS monitors the prices of the Colombo markets daily to compile the Colombo Consumer Price Index (CCPI), the official price index of the country. Statistics showed this market manipulation and there are significant differences in prices of the same products in different markets in the Colombo city on the same day.

In the first quarter of 2006 the average price of butter beans per kilogram at the Pettah, Kirulapone and Wellawatte markets were Rs.63.39, Rs.74.72 and Rs.100. The price for Mullet per kilogram was Rs.249.31, Rs.213.33 and Rs.332.08 in the same markets. Gunasekara said that entry barriers in these markets are very strong and government intervention to break the cartel is essential. Budget shops are therefore important, he said.

However, the budget shops should cater to the poor and lower middle class and not the rich. Unfortunately the Rajagiriya budget shop caters mainly to the other end, he said.

The budget shop is dominated by the traders of the Pettah wholesale market and vegetables are provided by Manning Market traders. They should be replaced by farmer associations and co-operative societies in Nuwara Eliya and Dambulla to give maximum benefits to the consumers and farmers.

This exercise will be successful only if it can sell products at least 15% lower than the market price, he said.

However, today the COL is beyond the control of the government and impacts of this kind of exercises are limited. Some external factors such as increasing the crude oil price has a greater influence on prices.

The high oil price increases cost of production and transport costs. Higher world economic growth and resulting high demand is another reason for the price increase of many imported products.

The price of building materials such as cement and steel are increasing due to high world demand.

Tsunami reconstruction has created a construction boom and as a result there is a big demand and prices are high. Sugar prices are increasing in the international market due to short supply as a result of producing bio fuel ethanol using sugarcane.