Price control disrupts rice market

by Gamini WARUSHAMANA

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The price control of rice has disrupted the market and as a result the quality of the rice sold at the maximum controlled price has deteriorated while consumers have to pay a higher price.

The advantage of a competitive market is that prices are adjusted according to the supply and demand while the consumer gets a lower price when the supply increases.

Traders sell low quality rice at a higher price and there is a limited choice for consumers today under the controlled market. There were different qualities at different prices in the competitive market. This is an inevitable scenario in a controlled market, analysts said.

Wholesale traders in the Pettah market said they cannot sell Samba rice under the controlled price and now they do not get stocks of Samba. “The maximum wholesale price is Rs. 70 per kg, but millers supply Samba at Rs. 72 per kilo to us. Hence we stopped selling Samba, said the proprietor of JMDR Company.

Traders said that there are large orders for Samba rice for the forthcoming Ramazan festival season but they cannot supply it as the business is not profitable. They call upon the authorities to increase the maximum wholesale price of Samba to Rs. 75.

Meanwhile, millers said that since the price of paddy is high they cannot supply rice below Rs. 72. However, market analysts said that the cost of Samba is around Rs. 47 per kilo and therefore the price should be around Rs. 60.

Dr. Sirimal Abeyratne of the Department of Economics, University of Colombo said that price control is not a long term solution. Price control was introduced to face the sharp increase in the price of rice as a result of the international market price increase and local policy issues.

It was a practical solution during that period. A controlled market may lead to disruption in supply and demand, quality issues and an emerging blackmarket situation. Therefore, these issues are inevitable and the only solution is a competitive market, he said.

Market analysts said that today the rice market is a cartel of a few traders and the market is controlled by a few traders in Polonnaruwa and Maradagahamula. They collect large stocks of paddy during the harvesting season and set the price. This situation should be changed and the government should facilitate more players to enter the market by providing credit facilities for small scale traders and millers.