Commodity importers jittery over ‘unfavourable trade policies’:

MRP not a sound move - Traders

by Lalin Fernandopulle

Commodity importers are jittery over the unfavourable trade policies adopted by the government which adversely impacts food security in the country.

A spokesman for the Essential Food Commodities Importers and Traders Association said the Maximum Retail Price (MRP) imposed arbitrarily on commodities by the policy makers is not a sound move given the global economic scenario and the sharp depreciation of the Sri Lankan rupee.

“The continuation of the adverse trade policies such as fixing an MRP and imposing levies on commodities will affect food security in the country,” President, Essential Food Commodities Importers and Traders Association, Nihal Seneviratne said.

“We have been calling to relax the MRP for imported essential food commodities and maintaining a reasonable retail price for commodities such as sugar, dhal, canned fish, sprats, onions, chillies and ulundu at Lak Sathosa and Coop City outlets islandwide while advertising the retail prices regularly and creating healthy competition among retailers,” he said.

Trade experts said imposing MRPs on essential food commodities which are mostly agricultural produce is not a correct move as prices of agri-products are subject to fluctuation based on climatic conditions.

“The steep fall of the Sri Lankan currency which is currently hovering around Rs. 145 to a US dollar and the volatility in the global market has aggravated the situation. The rise in prices of imported food items is inevitable,” Seneviratne said.

Sri Lanka spends a colossal amount annually on the import of milk food products and sugar.

“Importers have to make advance bookings based on forward prices to ensure food security with continuity in supply.

“Our concern is the imposition of MRP at arbitrary price points which could adversely impact the continuity of supply and availability of essential food items in the country,” Seneviratne said.

Trade experts said market forces should be allowed to operate given the rise in world food prices. Imposing restrictions on prices will compel merchants to curtail imports which in turn would create a shortage of essential food items.

Importers said while the maximum retail price of a kilogram of sugar is Rs. 87 the import cost is around Rs. 95 per kg. The import levy on a kilogram of sugar is Rs. 30.

The MRP on a kilo of dhal is Rs. 169 while the import cost is between Rs.185 to Rs. 195. Importers of essential food items aired their grievances on the MRP entitling them to a narrow profit margin of one to 1.5 percent. They said a realistic variation in prices of around 15 to 20 percent should be reflected between wholesale and retail prices for islandwide distribution to be economically viable.

Trade analysts said government intervention in the market through price controls will result in market imbalances.

However, they said the government is compelled to fix MRPs in certain situations to protect consumers even though it allows market forces to determine prices.

Prices of commodities are normally determined by supply and demand in the market. Governments impose a minimum price to protect the producers and imposes a maximum price to safeguard consumers from higher prices. Analysts said the government is bent on gaining political mileage by imposing maximum price control on food items. Minimum prices have to be imposed during bumper harvests with oversupply to protect producers from incurring losses due to the fall in prices.

Importers said the authorities are only concerned about carrying out raids and imposing fines on traders violating regulations. They are not keen to address the concerns of traders.