Food importers hit by price control, Govt firm

Sugar importers warn of Rs 900 M losses, CAA threatens raids, CWE ready to import essential foods :

by Rukshana Rizwie

Claiming massive losses due to the new price controls, essential food importers are threatening to stop imports but, government authorities say they will import via the state-owned CWE and take errant traders to task.

Reacting to the sudden slapping of 'maximum retail price' controls on a range of essential foods, sugar importers say they, alone, could face losses ranging from Rs.750 million to Rs. 900 million. This would occur when MRPs are imposed on retail traders amidst fluctuations in world market prices, local levies and existing value added tax, wholesale traders warned.

The Ministry of Industry and Commerce announced a stipulated set of maximum retail prices (MRP) for 16 essential commodities which came into effect through a gazette notification on midnight Thursday (14).

According to the gazette notification, the retail price for Chicken with skin Rs 410 per kg while skinless is Rs 495 per kg, red dhal Rs 169 per kg, sprats (Thai) Rs 495 per kg, sprats (Dubai) Rs 410 per kg.

Chickpeas Rs 260 per kg, green grams Rs 220 per kg, canned fish 480 grams Rs 140 (105 grams Rs 70), white sugar Rs 95 per kg, white flour Rs 87 per kg, full cream milk powder imported Rs 810 per kg local Rs 735 per kg, imported potatoes Rs 120 per kg, imported big onions Rs 78 per kg, dried chillies Rs 385 per kg, dried fish - Katta - Rs 1,100 per kg, dried fish - Salaya- Rs 425 per kg, Maldive fish -Rs 1,500 per kg, and Sustagen - Rs 1,500.

"Our main concern is with the Rs.30 levy which has been imposed on imported sugar, with the stipulated maximum retail price, importers could face losses in the range of Rs.750 million to Rs.900 million since we already have 25 metric tons of buffer stocks," said Nihal Seneviratne, President of the Essential Food Commodities and Traders' Association.

Remove Rs.30 levy on sugar - importers

"We have spoken to the Minister and the Secretary to the Ministry of Trade and Commerce, and were told that the Rs.30 levy on sugar will be removed, but we are yet to see a directive citing so," he said.

Seneviratne warned, traders would refrain from importing commodities such as sugar, chillies, and chickpeas if the trend of taxation continues. Sri Lanka has been importing white sugar from India the prices of which have been on the increase. Importers have to pay Rs. 30 a kg in addition to fluctuations in world market prices due to the depreciation of the Rupee against the US Dollar.

Impending artificial shortage

The Pettah Traders' Association President P. Sundaram told the Sunday Observer, it was not the MRP which the traders were concerned about, but the existing levies and Value Added Taxes.

"The 15% tax imposed on textiles and other commodities is a huge burden, and with an MRP in place, it will become increasingly difficult for traders to sell at stipulated prices." He said, his association would seek a meeting with the Minister of Finance next week so that they would formally request reviewing some of the taxes. He warned, there could be an artificial shortage since traders tend to hoard buffer stocks until the price is increased.

Rupee depreciation against US Dollar

"The Rupee has depreciated by 15% over the past few months and every imported item is inclusive of the 15%. In addition, local levies and duties imposed on the government will put traders in dire straits unless the government lifts some of them," he said. "Chickpeas are imported from India and prices have been on the increase, which currently costs Rs. 300 per kg, so it's unimaginable for us to sell at Rs.260 a kg."

The President of the Association added that importers will refrain from importing these commodities, while wholesale and retail dealers face the brunt of it. "When we met with the Ministry officials, prior to the announcement of the MRP, we communicated to them verbally and in writing, that margins between the importers, wholesalers and retailers need to be respected, because it takes into account the cost of wastage which is often excluded."

Cost of wastage

He added that margins are now constricted with the new price list and would indefinitely discourage small time importers and wholesalers alike from purchasing or selling these essential commodities. "Perishable commodities such as big onions come with bigger margins due to the likelihood of wastage. Traders in Pettah and other markets in Colombo or Dambulla might be able to sell it at the MRP of Rs.78 per kg, but not the retailer who is further away from distribution points, as there is a cost of transportation and waste, which needs to be taken into account."

MRP based on price list by Customs

T. M. K. B. Tennakoon, Secretary to the Ministry of Trade and Commerce told the Sunday Observer that importers cannot refrain from importing some of the essential commodities since the prices affixed by the Ministry were based on the price list given by Sri Lanka Customs.

CAA to conduct raids

"We know at what price the importers are getting down these essential commodities, our new list is based on the price list given to us by the Customs Department," he said. "If they cannot import it, we can always task the Cooperative Wholesale Establishment (CWE) to do so." He added, if the warnings sounded by the importers materialize, the Ministry will take steps to address the discrepancies by increasing prices for selected items. Tennekoon said, the Consumer Affairs Authority has been tasked with conducting raids starting this week to penalize traders who are flouting the law.

Meanwhile, Chandrika Thilakarathne Director, Consumer Affairs and Information at the Consumer Affairs Authority said, a series of consultations were held with all stakeholders including importers, before arriving at the new MRP.

Dambulla Dedicated Economic Centre Manager Christy Wijeratne said, the retailers at the Centre have been informed of the new price list and it would be maintained at all costs.

"If the wholesalers or importers have an issue, it is best to seek the intervention of the Ministry of Finance or Trade as we have no qualms about the MRP."