Fair prices for essentials?
Posted on December 30th, 2017

Upali Cooray Former General Manager of SATHOSA

Prime Minister Ranil Wickramasinghe has said government has taken measures to introduce fair price shops in collaboration with private sector and Sathosa to ensure fair prices for essential commodities in the open market. This statement of the prime minister is something like dousing fires without preventing fires. Considering the fact that the oncoming crucialelections scheduled for February 2018 he has to say something to the masses who are burdened with high commodity prices. Sathosa has seen six Chairmendeparting quickly unable to withstand interference by the trade minister who has held this post for eight consequent years.

I cannot recall any period of time when the cost of living issues, specifically the exercise of thwarting the escalation of prices of essential commodities has been handled so badly due to lack of timely, sensible decision making resulting in a frenzied mess up.

As very strongly pointed out by the media the entire effort depicts, corruption, amateurism, confusion andfrenzy. The unrealistic prices in many essential food stuffs during the festive season is not a phenomenon which occurred due to unavoidable circumstances” or unforeseen” reasons. It is a situation which has occurred due to downright manipulation, lack of vision and ignorance.

The government machinery is equipped with more than adequate resources to forecast market trends fairly accurately and this crisis situation could have been avoided if timely action was taken. Preventing fires” is a safer option than dousing fires”.

The Cost of Living and Food Security Coordinating Committee (COLFSCC) now headed by the Prime Minister himself has as its members all relevant heads of Ministries, departments and other government institutions to advise and guide the decision making by the Cabinet. The cost of living is a phenomenon which cannot be held down, but market distortions resulting in sudden unrealistic prices can conveniently be avoided by constantly monitoring and adjusting the upward trends by timely action.

The COLFSCC was first headed by that eminent bureaucrat G.V.P Samarasinghe during the post 1977J.R.J government. The committee met like a prayer every Friday for a review of market situation and forecasts.

To name some of the eminent Secretaries who chaired the COLFSCC and entrusted with the responsibility of food procurement and distribution were men like M.D.D Peiris, Lakshman De Mel, late Gaya Kumaratunga, late R.A.P Goonatillake, and T.P.G.NLeelaratne.

These senior officers were very experienced in internal and external trade and the so called private sector Mafia could not hood – wink them. They knew how to avoid unnecessary crises in the market and advised the ministers well in advance to take timely action. The COLFSCC is the most crucial arm the government can make use to forecasting and planning strategies to prevent market distortions.

According to recent media reports the Ministry of trade and Commerce attempt to import Coconut kernel from Kerala and Malaysia was thwarted by the far thinking Minister Harsha De Silva. Trade minister Rishad Badiuddin appears to have personal interests before national interests. He has been the Trade minister for last eight years continuously just because he can bring some minority votes to the government. MinisterHarsha De Silva pointed out importing Coconut kernel could lead to coconut diseases hitherto unknown beingbrought in to the country. Coconut should never be imported in to this country. The fact remains that the drought is not the only reason for the poor harvest but was the neglect of existing estates due to high cost of fertilizers and inclement weather this year. What is necessary is to inculcate among growers and give incentives for practicing modern methods such as use of organic fertilizer and drip irrigation to grow coconuts in the growing areas. The ban in felling coconut trees has only a minimal effect. Drip irrigation though has a high initial capital will pay back in the long term because the use of water is very minimal and hence the trees will withstand droughts of long duration..

Notwithstanding the short term solution of importations, the long term solution should be import substitution which has only been a catch phrase of many a government since independence; not yielding satisfactory results due to lack of political will of populist policy makers.

Yearly escalation of prices of rice during the latter part of every year for the last 40 years is clearly reflected in statistics compiled by the Central Bank and the Department of Statistics. Therefore it is not an unexpected increase in prices. Steps should have been taken at least in the month of May to meet the yearly shortage and whatever decrease in quantities on account of the long drought without procrastinating till the crisis became fully blown. The failure to take timely action is a severe set back and a condition this government is afflicted with when it comes to cost of living. The formal method of importing rice is to call for open tenders or from prequalified suppliers. Initially the reorder levels and reorder quantities should be determined and arrival periods adjusted ensuring not to have a backlog. Then the specifications such as unhusked grains, black seeds, insect attacked seeds, broken seeds, moisture content percentages per ton,packaging, should be specified. Despite all these precaution the suppliers especially in India and Pakistan can obtain quality certificates from unscrupulous cargo surveyors. Therefore it is of utmost importance to send Sri Lankan quality control officers from the procuring institutions to be at the port of loading. These officers dare not give false certificates because they know very well that they will lose their job.  Emergency imports are a method of manipulating the needs of the commission agents.

One cannot grasp how 100, 00 MT of white Nadu riceper month (par boiled) be consumed by this country. Par boiled white rice is mostly consumed in the estate sector. The southerners prefer partially red rice par-boiled or raw, and the northerners need par boiled complete red rice. The urban middle class consumers prefer Samba, Keeri Samba or Supiri keeri Samba (Short grain parboiled/raw red or white rice) Sri Lanka’s   2016/17 total production of rice is 1.4 million metric tons. Government envisages importing 100, 00M/T every month from Dec 2017 to March 2018 viz. a total of 400,000. Considering the fact that there have been heavy rains; the farmers were hopeful to have a good harvest but their hopes  have been battered on account of the severe shortage of Urea. Here again is a short sighted policy of importing Urea. In short it is inefficiency, lack of foresight and manipulation. The private sector importers will import quantities prudently and sell their stocks at a profit. The festive season will see unprecedented price hike of rice.

The state has never bought more than 10% of the Paddy harvest because it does not have the finance and the logistics to do so. This was so even when the Paddy Marketing Board was in full fly. Even what is procured by the state is low quality rice. The best quality is either hoarded by the millers and traders or farmers themselves with a view to making unconscionableprofits. The the Rice Mafia” is within the government itself.

The latest scheme by the trade ministry headed by Minister Badiuddeen is spelling out PMB should sell Paddy only to the Sathosa. Apart from the Sathosamills at Higurakkoda and Pannegamuwa which were set up during my time with Indian aid. These two mills are now defunct. There are well over thousand small time millers. What the Trade ministry does is to sell back the paddy to private small time millers throughthe Sathosa. Why should private millers buy Paddy from Sathosa when they can go direct to the PMB and buy at a lower price? It is clear that Sathosa has now become the commission agent for paddy. Who collectsthe Commission?

The indications are that the cost of living would worsen towards the Sinhala and Hindu New year with more price escalations especially in respect of vegetables. To sight one astonishing example is how vegetables such as Potatoes and Beet root grown in the Nuwara Eliya District is transported to Dambulla Economic center by middlemen and then transported back to Nuwara Eliya town for sale. Of the vegetable and fruits harvested in this country 40% perish in transport and handling. When the previous government attempted to reduce this wastage by introducing crates in transport, it had to be abandoned on account of thepressure brought on by the transported and the middlemen.

It is heartening to see private sector super market chains have come to the rescue of vegetable and fruit farmers.  The embedded farmers to the supermarket chain cultivate crops under the supervision of the supermarket company. They are provided with funds not only for cultivation, funds for the education of childrenare also given.  The farmer is expected to give the harvest to the super market collecting centers in the region. The transport to Colombo is by crates and perishability is around 15%. Super market vegetables and fruits are better in quality and lower in price.

The eyewash on the pretext of fair prices will end up resulting in more hardships to the majority poor.

Upali Cooray


Former General Manager of SATHOSA

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