‘Price control through taxation, self-defeating’
Posted on October 11th, 2018

By Hiran H.Seneiwiratne Courtesy The Island

The government’s price control practice  through taxation on essential items does not serve the purpose because it limits the value in reducing cost and damage markets by preventing the supply of products from rising to meet demand, a top market research company said.

“The price controlling of consumer goods actually can cause significant welfare losses, deterioration in product quality and a reduction in investment in the long run for traders in the country due to higher prices. Therefore, it is more a political drama when an election is round the corner, said Ravi Rathnasabapathy, Fellow member of independent research institute and policy think tank, Advocata, at a panel discussion  following a  survey report launch titled,  ” Price Control in Sri Lanka: Political Theater”. The event was held at the NCC on Tuesday.

According to Rathnasabapathy, a comparison of controlled prices  against retail prices as per the open market weekly average retail prices show that of 13 basic groceries only milk powder was being consistently sold at the controlled prices throughout the relevant survey period.

” No one, not even the Consumer Affairs Authority, possesses a comprehensive list of items subject to price control in the market because the government imposes price controls through gazette notifications periodically, he said.

He said that politicians have imposed price controls on a variety of items through taxation believing  that capping prices will lower costs but the survey shows that they are of limited value in controlling the costs of goods.

Frontier Research Product Head Travis Gomez  said at the panel discussion that serious enforcement seems confined to items produced by multinationals or large corporates. Some of these items are: milk powder, cement, cooking gas, which are administratively easier to police but unfortunately the government appears to have taken enforcement in the unorganized sector at the expense of consumer choice and quality.

Gomez also said that when it comes to cement prices it is more economical to import high quality low priced cement and pack it and sell it to the market rather than manufacturing cement in Sri Lanka.

Breakthrough Business Intelligence Executive Director Dilini Jayasuriya said that unnecessary price controls will affect the quality of the products and create an ambiguity in the market.

She also said that traders will resort to various bad trade practices, such as, selling low quality products and overlooking product quality, resulting in a reduction in investment and in the long run, higher prices.

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