The cost of living takes off in space: price control raised, facade by market players | Print edition

By Chrishanthi Christopher

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Long queue at Madurankuliya in Puttalam.Pic by Hiran Priyankara

The lifting of price controls on essential commodities such as cement, gas, sugar and chicken by the Consumer Affairs Authority (CAA) resulted in an unprecedented rise in prices, with market players voting on the figure.

The CAA, the essential goods price index regulator, justified the price increases and said price controls had been lifted on many items.

The price of sugar climbed to around Rs. 200 per kilo from its controlled price of Rs. 122 last week and chicken was sold at Rs. 750 per kilo, a jump from Rs. 250 per kilo.

The Poultry Association said the cost of production, including the price of poultry feed, transportation after rising fuel prices and other expenses, had skyrocketed.

Former association president Mathalie Jayasekara said there may be further price increases as prices rise after the 2022 budget is presented.

Meanwhile, even though the CAA has approved a sharp increase in the price of cooking gas, a shortage persists with long queues outside distribution points selling gas cylinders. Many have returned home empty-handed or after finding alternatives, including firewood and kerosene for cooking.

However, kerosene was also not available, with housewives complaining that they often struggle to prepare a good meal for their children.

Litro Gas, the main supplier of cooking gas to the market, said the gas shortage was due to its inability to clear its shipment from the port.

“There was a four day delay last week. This depleted the buffer stock and caused the shortage, ”said Janaka Pathiratne, Marketing Director of Litro Gas.

He said he believed the supply would be normal in the next ten days.

Meanwhile, the construction sector has been hit the hardest, with many construction operations stalled due to lack of cement.

Builders have complained that the rising cost of cement will make it too expensive for them to complete contracts already in place.

The price of local cement last week soared to Rs. 1600 for a 50-kilogram bag, with contractors complaining that it would not be possible to cost-effectively close the ongoing contracts.

The National Construction Association of Sri Lanka said a 50 kilogram bag of local cement had a tag saying the price was Rs. 1,275, but the hardware was selling the bags of cement for Rs. 1,600.

President Susantha Liyanarachchi said middlemen buy most of the local cement, creating an artificial shortage, with the price determined by market demand.

Sri Lanka’s regular cement needs have been estimated at around seven million metric tonnes per year, of which 30% is made locally and 70% imported.

However there was a shortage of imported cement due to the lack of dollars in local banks. This increased demand for local cement, with larger players buying most of the shares.

It also prompted the construction industry regulator, the Construction Industry Development Authority (CIDA), to float the price of cement.

CIDA director Suvindra Amarasekera said it was futile to publish the price index in her monthly newsletter because cement was not available from local manufacturers.

As such, he said a decision has been made not to mention the price of cement in the market until the price stabilizes.

Currently, a 50 kilo bag was sold for Rs. 1500 to Rs. 1600 from the previous price of Rs. 1275.

Industry sources said the price fluctuation was caused by the scarcity of the “green buck” and rising shipping costs due to pandemic restrictions at ports.

Following this, officials in the construction sector met with Finance Minister Basil Rajapaksa last week to discuss the crisis, and he gave assurances to take steps to stabilize prices.

As a result, the government agreed to add 19 new cement importers to the fray. This was to increase competition and stabilize market prices.

However, market sources question the timeliness of this decision when dollars were not available for regular imports.

“This will only increase demand for the ‘green dollar’,” said one importer.

Industry sources also said the finance ministry failed to provide relief to the besieged industry.

Under sections 53 and 54 of the CIDA Act, the government should allow contractors to charge higher prices to customers because of the increase in the price of cement. This would only apply to current contracts.

“About 70% of our cement is imported and we need to get our help,” Liyanarachchi said.

CIDA President Retired Major-General DMS Dissanayake declined to comment further and said he was busy at a meeting.

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