Consumers yet to benefit from drop in oil prices

by Rohana Jayalal

“World crude oil prices have dropped sharply during the past few weeks. However, the benefit is yet to be passed on to the consumer. Therefore, as a responsible Association we call upon the government to reduce the price of diesel to cut down on transport costs,” All Island Consumer Rights Protection Association (AICRPA) Secretary, Mahen Deva told Sunday Observer Business.

He said tax and prices increases have a negative impact on many aspects of consumers’ lives. People won’t get the same nourishment as green vegetables by eating dried fish and canned fish.

Deva said the Association hopes the government would intervene to reduce the cost-of-living burden on consumers.

Director General of the Department of Fiscal Policy, A.K. Seneviratna said the tax hike will directly impact the telecommunication sector and the new tax may affect some other sectors too. The Nation Building Tax (NBT) was increased from 2 to 4 percent in Budget 2016. He said that the decision to increase telecommunication rates lies with the service providers. The nation building tax would not be imposed on essential food items, electricity and water, Seneviratna said.

The ports and airport development levy will be increased from 5 to 7.5 percent. The changes would need an additional Rs. 15,000 to be paid to banks per motor vehicle at the time letters of credit for import are opened. For three-wheelers and motorcycles it would be Rs. 2,000.

However, 11 essential items are now under the Special Commodity Levy. Changes to other taxes such as VAT and PAL do not have an impact as they are exempted from the new Nation Building Levy (NBL). “Essential goods are not affected by changes in other taxes, as the NBL does not apply to them. Hence the prices of ‘essential items’ would not change,” he said.

Chairman, All Ceylon Bakery Owners’ Association, N.K. Jayawardena said, “We had talks with Finance Minister Ravi Karunanayake on this issue and he promised some relief. Till this is provided, bakers cannot give any relief to customers. Food outlets have increased the price of packets of lunch, pastries and other bakery products passing on the additional taxes to unsuspecting consumers.”

Jayawardena explained that the increase in the Nation Building Tax to 4% had affected the prices of ingredients used in bakery products.

The price of a packet of rice was increased by about Rs. 30 from last week, in most takeaway outlets while most pastries and confectionery products were increased by Rs. 5, Jayawardena said.

He said they passed on the NBT increase to customers as there were no controlled prices for cooked and most bakery items and, therefore, they could fix their own prices.

He said an executive committee meeting of the Association will be held to reach a final decision.

Research Officer and Head of the Marketing Food Policy and Agri-Business Division (MFPA), Hector Kobbekaduwa Agrarian Research and Training Institute, W.H.D. Priyadarshana, said this was the intervening period between the Yala and Maha seasons. Crops from the Yala season are harvested from September to October while crops for the Maha season are planted from November. As such, what we tend to get during this time are mostly short-term crops.

Every year there is a general increase in vegetable prices from November to January due to the rains that prevail during these months.

There is no significant increase in demand, but the supply is low, hence the high prices.

He said prices would drop down after the end of January, as the weather tends to improve around this time.

Some vegetables sent to the wholesale market are inferior in quality due to the weather. The quantity that actually reaches the consumer is even less, Priyadarshana said.He pointed out that the prices of several subsidiary food crops have been reduced by the Budget to offset the impact of the price increases of other items while also imposing the maximum retail price for several consumer goods. At present, there is a maximum retail price in place for items such as dhal, sprats and dried fish, while the prices of potatoes and onions have also been reduced.

A spokesman for the Dambulla Economic Centre said that the wholesale prices of many vegetables in the market had increased to over Rs. 300 a kilogram.

The wholesale price of a kilogram of beans, carrots, leeks, banana and pepper had increased to over Rs.300 per kilogram at the Centre.

The prices of low country vegetables such as bittergourd, brinjals (eggplant) and snakegourd have also increased to between Rs.130–200 per kilogram.It has been observed that when wholesale market prices reach such a level, the prices in the retail market also increase by Rs. 100 more. Farmers point out that the reason for the sharp increase in vegetable prices was the destruction of crops by the incessant downpour experienced in recent days.

A vegetable trader in Pettah, N.A. Mahinda said the current prices are the highest experienced in over 17 years. From the day prices increased, most customers bought less quantities.“Nobody purchases more than 500 grams per item, unlike earlier. This is because most vegetables are over Rs 100 per kilogram, and people cannot afford it,” he said.