Milk powder crisis:

Govt to get tough

By Kurulu Kariyakarawana

Milk powder is an essential requisite for Sri Lankans. It is a part and parcel of the Sri Lankan tea drinking habit. Amidst the Government's effort to wean the people away from depending on milk powder to fresh milk like in the western countries, the necessity for powdered milk is still considered an essential ingredient to those who could afford to purchase it.

Like the controversial incidents reported in the recent past where certain top rung milk powder importing companies were temporarily barred due to chemical substances allegedly found in the powder, the latest woe is over the shortage of products in the market.

Minister of Co-operatives and Internal Trade Johnston Fernando

Chairman Consumer Affairs Authority Rumi Marzook

Assistant Vice President, Corporate Affairs and Communications, Nestle Lanka, Bandula Egodage

More and more empty shelves in supermarkets gave the impression that there is a severe scarcity of milk powder in the country which later turned out to be due to the government's refusal to approve proposed price hikes by milk food importers.

This was confirmed by two detections by the Consumer Affairs Authority (CAA) in Welisara and Seeduwa where large stocks of milk powder were found in private warehouses of Nestle Lanka and Lanka Milk Foods.

The milk powder which was stored or rather the fact that they were concealed in these private warehouses were strongly denied by the companies saying that those were not part of their products for distribution but reserved for their staff.

Although the authenticity of those statements were questionable the CAA initiated separate investigations into the cases which is progressing.

The first detection was conducted in Welisara on December 4 where 12 metric tonnes of powdered milk was recovered. The product, Lakspray, belonged to Lanka Milk Foods was in 480, 25 kg bags.

The officials of the company upon questioning told the CAA that the stock has been reserved for their staff and not for sale.

The Gampaha Office of the CAA detected this and on the following day they found another private warehouse holding another large stock of Nespray milk powder belonging to Nestle Lanka.

It contained 250,000, 400 gram packets. The officials of the second company said that they never hid the stock but it was one of their distribution points.

On Thursday CAA conducted another raid where a stock of Anchor milk powder belonging to Fonterra Lanka was found stored in a warehouse.

But it was later revealed that the products were actually waiting to be released to the market.

In the wake of this crisis, Minister of Co-operatives and Internal Trade Johnston Fernando ordered his ministry secretary to draft a gazette notification to register all the warehouses belonging to milk powder importing companies under the CAA, to monitor the actual inflow of products to the market, whether companies hide stocks to create a shortage as a negative response to government refusal to increase prices and also to counter instances of selling outdated milk foods with altered expiry dates.

Hiding milk powder in response to not permitting the demanded price increases cannot be justified and those who are responsible for that would be seriously dealt with, said CAA Chairman Rumi Marzook.

He said the milk powder importing companies desire to ridicule the government at a festive time like this when the requirement for goods is high. Holding the government to ransom is not fair during a period like this where a quick decision cannot be given in favour of these companies considering the fluctuating milk powder prices in the world market. The subject minister had ordered tough legal action against those who attempt to create a scarcity by concealing milk food stocks, Marzook said.

However, the law is clearly defined in the Consumer Affairs Authority Act No. 09 of 2003 on the instances of hiding goods or not selling them over various reasons and interests of the traders. These are mentioned in Sections 15, 16 and 17 of the Act.

In Section 15, Clause (I) states, "No trader who has in his possession or custody or under his control any goods for purpose of trade within Sri Lanka, shall refuse to sell such goods".

Section 16 states, "No trader who has in his possession or custody or under his control any goods for purpose of trade within Sri Lanka shall, (a) deny the possession of such goods...." and in Section 17 (I) "No trader shall conceal in his place of business or in any other place, any good in such quantity as is in excess of the normal trading requirements of such trader".

Violation of these sections could result in a penalty either a Court fine of between Rs.10,000 to Rs.100,000 or confiscation of products.

A senior investigating officer of the CAA speaking on conditions of anonymity said that they act on public information related to the concealment of stocks and have instructed all the divisional offices to run checks on all warehouses that contain milk foods especially the those maintained by milk powder importers.

A proposal to increase the prices of imported milk powder was forwarded to the CAA by five leading companies including Fonterra Lanka, Maliban Milk and Lanka Milk Foods last August.

Since milk powder falls into the essential goods category any trader dealing in it has to get approval from the CAA to increase prices.

This has to be done by submitting an application and according to normal procedure the CAA takes 30 days to determine whether to increase the price of a product or not.

However this has not been possible yet due to the fluctuating prices in the world market.

The CAA experts in the pricing division require a few more weeks to determine the prices which they believe will be finalised by second week of January next year.

A metric tonne of milk powder in the world market which was $5,200 in October is now $5,000.

The leading importers have demanded a price hike of Rs.250 per kilogram and Rs.100 per 400 gram pack. The controlled price for milk powder is Rs. 810 per kg and Rs. 325 per 400 gram pack.

One milk powder company has increased its price by Rs. 190 per kg since November and is currently involved in a Court case.

The company that argued which the CAA should revise the prices within 30 days according to the normal procedure has lodged a complaint against the CAA for its inability to revise prices on time and has increased the prices at the same time too.

[We run a transparent operation - Fonterra Lanka]

By welcoming the Cooperatives and Internal Trade Minister Johnston Fernando's move to register all warehouses that hold milk powder stocks of private importers, a senior officer of the Fonterra Lanka told the Sunday Observer that they have no objections over the decision.

The company has been running a transparent operation in Sri Lanka for decades where they have their warehouses in Biyagama and number of distribution points countrywide which are open for inspection at any time by the CAA.

The officer said that it is obvious a price revision should be made by the relevant authorities due to the increasing price levels in the world market. He said that the private milk food importers have to come in to terms with the government to receive concessions for their business.

[We are not a key player in the industry - Nestle Lanka]

Referring to the seemingly non-availability of milk powder in the market, Assistant Vice President, Corporate Affairs and Communications, Nestle Lanka, Bandula Egodage said that Nespray is not a key player in the industry. He said that Nespray holds only 18% of the milk powder market in Sri Lanka. Therefore, the non-availability of Nespray in "all places" compared to the other brands is understandable.

Egodage also welcomed the government's decision to bring provisions to register all private milk powder storing warehouse with the CAA saying that they have nothing to hide. Nespray is not among the group of companies that proposed a price hike since they do not import milk powder.