by Garvin Karunaratne
Sky rocketing prices of vegetables and fruit has happened to be
the order of the day. Once we did have a method to control inflation by
ensuring that traders cannot keep a fat margin. That was the system built up by
Sri Lankan administrators RH Basset and BLW Fernando Commissioners of the
Department for Development of Agricultural Marketing. This system was
worked in a perfect manner from the Fifties till the late Seventies, when
we bowed to the IMF and abandoned it.
I enclose a Paper written by me a few years ago which details the
system which was unique to Sri Lanka. Opening more Economic Centers do
not provide an answer to inflation. Perhaps this paper may offer some
ideas.
Controlling Inflation: Howonce we did it
Inflation-
Rising Prices is a major concern today. Sri Lanka had built up the
infrastructure to control inflation. What we are seeing today-unbridled
inflation, has been caused because we did away with the infrastructure we
had.
For the
marketing of essential commodities, in my own words:
The Department for the Development of Agricultural
Marketing”¦ ensured that prices of all essential commodities were indirectly
controlled and the traders were compelled to offer fair prices to the producers
and the retail shop keepers were compelled to sell at fair prices to
consumers. This is a system that I have never seen elsewhere in the
world’ ¦The motto of the Department was to pay the highest possible price to
the producer and sell at the lowest possible price to the consumer.( From:
How the IMF Ruined Sri Lanka,”¦ (Godages)
I was involved with the entire
System because I was appointed Assistant Commissioner for the Development of
Agricultural Marketing in 1955, and worked in the Ratnapura, Hambantota,
Anuradhapura Districts as well as was in charge of the Tripoli Market,
the Headquarters of the Vegetable Marketing Scheme for a year in 1957.
This System involved a Network
of Retail Shops(Fair Price Shops) in every major city and a Vegetable and
Fruit Marketing Scheme involving purchasing, selling and processing
vegetables and fruits, a Scheme that covered the entire island.
The
entire island was covered by Assistant Commissioners in the Provinces and
Marketing Officers posted in producer areas, who had to +report the
availability of produce, prices at the Fairs, and guide producers to plant
varieties in demand.
A
Network of Retail Shops(Fair Price Shops)
In order
to enable the availability of essential food the Marketing Department
established a large number of shops in the cities and these shops were well
stocked with essential food like dhall, sugar, flour, onions and vegetables.
These were sold at rock bottom prices, where no profit margin was kept. The
intention was to unofficially control the retail prices offered by private
traders. When a well stocked shop was selling goods at a low price the private
retailers too had to sell at similar prices otherwise they will have no sales
because the consumers will all go to the Marketing Department shops and the
private shop keepers will have to close down. Assistant Commissioners had to
ensure that the Departmental shops were well stocked.
An
incident comes to mind. I was then in charge of the Southern Province with my
office at Ambalantota. In the Red Onion season we got wagon loads of red onions
from Jaffna and we were required to sell at whole sale prices to traders and
also to sell at our shops. One day I had just inspected our shop at Galle
and also visited a number of private traders’ shops to ensure that they did
sell red onions at reasonable prices. I returned to Ambalantota. The next
morning in office I got a telegram from Head Office. It read, Member of
Parliament Dahanayake reports that there is a shortage of red onions in Galle.
Inspect and report at once”. Those were the days when we had no mobile phones
and it was very difficult to get long distance calls. . I got into my car and reached Galle by around four. I
went straight to our shop and found it well stocked with red onions. I checked
the books for sales. I visited a number of private shops and found them well
stocked selling at a slight higher price than our price. That was how it ought
to be. Armed with these details I went to Mr Dahanayake’s residence. He was not
in and I waited for him. I knew him well. It was late in the night about ten
that he came home and inquired what brought me there. I brandished the telegram
and said that I had been in Galle the earlier day and found that red onions
were available in our shop and that there was no shortage. He looked hard
at me for a few minutes and said, Garvin, You know a man came to meet me and
said that there was a shortage of red onions and to satisfy him I sent a
telegram to the Minister” I quipped, ” But sir,
there is no shortage and there never was” ” That
I know but to keep that man happy I had to send a telegram.” He added,” That is politics, Garvin. We have to keep our
supporters happy. Don’t you worry, next time when I go to Colombo I will meet
the Minister and tell him that there is no problem here with the Marketing Department” That was all. I reported this meeting to our Commissioner
and never heard again. Presumably Mr Dahanayake had phoned the Minister.
We Assistant Commissioners had to have a dragnet over all essential supplies
and that included not only our shops but all private shops. It was an indirect
control of prices and availability.
Again,
once at the District Coordination Committee at Anuradhapura it was reported
that the few traders were fleecing the colonists at Padaviya by charging high
prices. I was the Assistant Commissioner at Anuradhapura and said that we will
open a shop at Padaviya. I got covering approval from the Commissioner and in a
few days time opened a Shop at Padaviya, to serve the colonists. Our Shops
effectively controlled the cost of living. The private traders had to cut their
profits as otherwise they would be out of business. That scheme worked
well.
The Vegetable and Fruit Marketing Scheme
The
Marketing Department established Vegetable and Fruit Packing Sheds(actually
purchasing units) in all producing areas. The name given was packing sheds and
they were in many places in temporary buildings mostly made with timber. Even
some Assistant Commissioners had their offices in these temporary buildings in
1955.
The
entire Vegetable Marketing Scheme was administered from Tripoli Market, based
in the largest hangar in the Colombo Goodshed. One part of the Scheme was
to purchase vegetables and fruits from producers who brought their produce to
our Vegetable Packing Sheds. They were paid immediate cash. The Department was
equipped with lorries that were sent to the chief Producer Fairs in the
producer areas. Thus there were mobile purchasing uints at all major fairs like
Embilipitiya, Colombage Ara, Bandarawela, Welimada, Kekitrawa to mention
just a few. These Purchasing Units comprised Marketing Officers and a staff of
purchasing officers and labourers. The produce brought in was weighed and accepted
from producers and they were paid cash immediately. The Assistant Commissioners
of the Districts were required to visit all major fairs to ensure that the
purchases were made regularly. When I worked in the Districts on most days my
day commenced at four to get to the Fairs by six in the morning. Vegetables
were purchased and packed and dispatched to Triploi by evening either by
wagons(by trains) or by special lorry.
At
Triploi Market, the Assistant Commissioner had a Marketing Officer at the
Colombo Wholesale Market. His task was to report the prices at which the
wholesale traders sold the produce to the retail traders and to report on the
availability of produce. In the Districts, the Assistant Commissioners and the
Marketing Officers had to report the prices at which private traders purchased
vegetables and fruit. Generally there was a wide gap between the prices
at which the traders purchased goods and the prices at which the Wholesale
Traders sold to the retail traders in Colombo. Based on these prices, the
Assistant Commissioner at Tripoli Market decided the purchasing prices at which
goods were to be purchased at the Fairs. This price was always above the prices
offered by the traders who bought goods at the Fairs. This helped the producers
and the traders at the Fairs too had to offer a similar price because otherwise
the producers will not sell to them.
On a
daily basis Tripoli Market received around twenty wagon loads of vegetables and
a similar number of lorries bringing in produce. These were checked and had to
be in our Retail shops by ten in the morning. Tripoli Market was a hive
of activity from early morning. Then the Railways ran a very efficient
service and brought in produce in time. For instance curd from Ridiyagama
Farm in Hambantota was sent by lorry to Matara and came by night mail train to
Tripoli. This was an item in high demand. The retail price we fixed for
Ridiyagama Curd effectively controlled the prices of curd in private shops in
Colombo.
The
Assistant Commissioner at Triploi Market kept a very low margin to cover up
cost of transport and handling and fixed a low price for sales to the consumers
through the network of Shops. Generally the Marketing Department kept a margin
of around 10 to 15% above the purchase price while the private trader at the
Fair kept a margin to 40 to 50% and the Whoelsale Traders too kept around
40% and further the retail trader too kept around 40%. Thus while the
private trader generally kept a margin of 100% or 120% over the purchasing price
at the Fair, the Marketing Department kept a margin of 10% to 15%. The
establishment of Special Vegetable Depots at Dambulla etc in recent
years, actually created another middleman, keeping a margin of profit.
The
working of the Marketing Department meant that the private traders at the
Fairs and the Wholesale Traders as well as the Retail Traders in the cities had
to be satisfied with a low margin.
The
Marketing Department in the Fifties was headed by BLW Fernando, a Chartered
Accountant and he would not allow any Assistant Commissioner to keep a higher
margin than 15%. That was a rule to be followed. Every month all Assistant
Commissioners had to attend a Conference where the Profit and Loss calculations
were closely studied and the Commissioner would chastise all Assistant
Commissioners that had a profit of over 10% or incurred a loss. We
were expected to cover up, not to incur a loss or to get a large profit.
This was
the key method by which the prices of vegetables and fruits were kept in check.
The Scheme has thus a dual aim- of offering the producer a fair price as well
as offering the consumer a low price. At times it was like walking on a
rope but we got used to walk on it.
The
Retail Shops had to be well stocked and full of goods otherwise the wrath of
the Commissioner had to be faced.
A few
years ago on one of my visits I found tomatoes being sold at forty rupees a
kilo by a producer on the Mahiyangana Road, when the retail price in Colombo
was around rupees eighty to one hundred, a margin of over hundred percent. This
could not happen while the Marketing Department was at work. The Assistant
Commissioners were eternally traveling as they had to visit Fairs,
inspect purchasing at the Fairs and the Vegetable Purchasing Depots, contact
producers and offer advice on items on demand. Generally our traveling
allowances exceeded our salaries.
Tripoli
Marker had cold rooms where the excess produce could be stored.
This
Vegetable Marketing & Fruit Marketingh Scheme was very successful in
ensuring that consumers in cities obtained vegetables and fruits at cheap
rates. The Cost of Living was kept in check.
The
Canning Factory
Local
producers got a boost with the establishment of the Canning Factory in 1955. At
that time Sri Lanka imported fruit juice and fruit from Australia and the task
of the Canning factory was to produce fruit juice, jam an-d jellies. The
Vegetable Purchasing Centers sent goods to the Canning Factory. At the initial
stages in canning fruit juice many problems were faced and it took over a year
to surmount them and get down to production for all Sri Lanka’s requirements.
The Marketing Department offered floor prices for pineapples, red pumpkin
and ash pumpkin and producers benefited immensely. Floor prices meant that the
Department will purchase everything offered at that price. Pineapple was tinned
and even an export trade was built up. Assistant Commissioner Oswald
Tilekeratne spread his wings abroad very often. Red Pumpkin was turned into Golden
Melon Jam and Ash Pumpkin was turned into Silver Melon jam. The Factory
activity made Sri Lanka self sufficient in fruit juice, jam and many other
processed food within a few years.
The Marketing Department was called upon to
attend to many tasks.
Once Sri
Lanka was not self sufficient in eggs. The Marketing Department offered a floor
price for eggs and Triploi Market collected eggs from the Negombo-Nattandiya
area till Sri Lanka was self sufficient in egg production. Once Self
sufficiency was reached the scheme was disbanded.
It was
found that during the Kataragama Season, the restaurants charged high prices
for meals. This the Government combatted by running a large restaurant.
Officers who have the ability were posted from various units and they provided
quality meals. The Menu included thosa, kiribath, string hoppers, pittu, rice
and curry and the restaurant was kept open till late. When I covered the
Southern Province I was in charge of this restaurant for two years and was held
responsible for providing good quality meals at a cheap rate. This was
the method by which the cost of living of the pilgrims was controlled.
With the
abolition of the Marketing Department, and the privatization of the canning
factory all this achievement was lost. That was the way in which the IMF
crippled the development of the Third World and created a situation where we
had to import from the Developed Countries.
Once the
tomatoes producers at Hanguranketa made pandals of tomatoes in order to
highlight their plight of not being able to sell their tomatoes. This could not
have happened while the Marketing Department was functioning. To start with the
Assistant Commissioner would be held responsible. If that happened when I was
in charge of The Triploi Market I would have sent a few lorries and the entire
stock of tomatoes would have been purchased within a few hours and it would
have been turned into Tomatoe Sauce and Juice at the Factory. Today Spain
produces tomatoe sause, tomatoe juice, tomato paste and sun dried tomatoes for
most countries in Europe. With a Tomatoe belt in Hanguranketa we cannot produce
tomato sauce even for our requirements. Our climate had enabled a variety of
crops. There is a mango belt from Anuradhapura to Matale. Even today if action
is taken to pluck mangoes and process it, we can be self sufficient in all
fruit juice within six months. The Chena cultivators will find sales for
their Red Pumpkin,Ash Pumpkin and Melon. There is an Avacado belt from
Peradeniya to Gampola and avacado juice can easily be made. The country will
benefit by avoiding the millions spent on imports.
Following
the liberalization free market economics of the IMF we created a market
for tomatoe sauce from the USA, and fruit juice from as far as Canada and
Oregan in the USA. Our producers have stopped producing large quantities
for fear of being unable to sell and we have unemployment and our farmers have
low incomes. The Colombo Supermarkets are full of Heinz Tomatoes sauce from the
USA and fruit juice and jam from Australia. The IMF did its work right to
cripple development in our countries and for us to buy goods from the Developed
Countries. That was the Structural Adjustment Programme in action. (For
more details: How the IMF Sabotaged Third World Development: Kindle
& Godages)
The Bakery
The
Marketing Department had a Bakery. This was the best bakery at that time and
produced bread and short eats at very reasonable prices. Then the price of
bread was controlled and this bakery enabled the Government to fix a reasonable
price. In the absence of the State attending to produce bread even if the
Government wants to fix a control price the Government has no definite method
of finding the fair price, as the government has to be guided by the Private
Sector bakeries..
The Marketing
Department with its vegetable and Fruit marketing Scheme and its Canning
Factory took not years but decades to build up. All was lost when at the behest
of the IMF President Jyawardena abolished the Marketing Department and
privatized the canning factory.
The IMF
advice which we have followed from 1977, has been for the Public Sector
to be limited to the barracks, while the Private Sector has a hey day. In my
experience it is the Public Sector has to be marshalled to serve the people
because the Private Sector will only work if they have a fat profit and that
profit comes at the expense of the consumer. The aim of the Public Sector is
not to supplant the Private Sector but to work with the Private Sector and
provide guidelines to avoid disaster. Today almost every Developed Country
including the USA, the UK, Spain, Greece and even Germany are all faced with
problems caused by the Private Sector bleeding the economies to death. It
began with the Banks. It is a system where the rich fleece the majority , even
at the cost of ruining the entire economy to aggrandize wealth. It is this
System that was foisted on the Third World countries like Sri Lanka by the IMF
and the earlier we understand this the better,
( For
more details my book: How the IMF Ruined Sri Lanka(Godages)
Today,
the IMF advice to Sri Lanka is to export to India and China. Both these
countries control their economies with a stranglehold and no one can export to
them, The IMF does not even understand the basis of their success. Take India
trade with them is always in their favour.. The Chinese economy is thoroughly
controlled. Every dollar that comes in is strictly accounted for. Both India
and China are not liberal and free economies. Both India and China have
succeeded in production and control inflation effectively.
To my
mind it is high time the present government re establishes the Marketing
Department with its Canning Factory and Cold Rooms. This will be a boon
both to the producer as well as to the consumer. I would urge that it be considered.
To my mind the Marketing Department mechanism is the only method of controlling
inflation and the cost of living’
