ECONOMYNEXT – A Sri Lanka truck driver halted by officials amid a black market created by their own price controls, was shown in national television said that he was not transporting stolen goods as price control threatened to take him to police.
Sri Lanka’s Consumer Affairs Authority created a blackmarket in red rice in particular by gazetting prices below the market clearing price, ahead of the Maha rice harvest.
The price controller is heard ordering the driver to ask the person who hired the truck to ask him where the rice was consigned to.
“Sir, here is the number, please ask him yourself,” the driver tells the price controller of the Consumer Affairs Authority in footage broadcast over Sri Lanka’s Derana24 Television.
“No, no you ask him. If not, I will take you to the police, along with the rice,” the price controller threatens.
“To take me to the police this is not stolen goods (hora badu ne-vei-nay,) sir,” the driver points out.
In Sri Lanka Commerce has been optional subject in ordinary level examinations many years ago, and the law or demand and law of supply may not be widely known to most adults, analysts say.
In a market economy, where both buyers and sellers interact results in the collective knowledge results in a market clearing price.
However, if there is a controlled price the quantity demanded exceeds the quantity supplied, leading to a ‘shortage’.
In Sri Lanka rice stocks go down in December and January, leading to a spike particularly in red rice, which cannot be readily imported.
Sri Lanka’s current rice crisis started after the Consumer Affairs Authority imposed price controls, in Nadu rice (par-boiled rice) at 230 rupees with red rice priced below that at 220 rupees, which would led to a steep rices in the quantity demanded for red rice.
At the time there was no shortage of red rice or any other rice but simply an increase price.
Red rice usually sells below par-boiled rice but has a tendency to sharply rise in December close to Samba.
In Sri Lanka bureaucrats and politicians have blamed various factors for the shortage, including a mafia, ex-President Ranil Wickremesinghe, beer manufacturing, chicken feed and the latest is wrong statistics, but not price controls.
“I am Kapila Bandara, Assistant Director, Southern Province Consumer Authority,” the price controller is heard telling the owner of the rice.
“Where is the rice going? To Kalawana? Don’t tell lies. We are going to go to police and put this court.”
“There are 15,000 kilos here, and you sent it here to Galle at 260 rupees (a kilo)”
The price controllers then made 100 sacks of rice to be unloaded to a shop where they were sold to the people at 220 rupees a kilo, the report said.
Queues were shown of people were seen lining up to buy rice at the controlled price.
Traders were quoted in the report saying they were giving red rice to customers who will not betray them to the price controllers.
The CAA has previously imposed controlled prices on dhall, sugar, tinned fish and made them disappear from shop shelves. Prices usually rise across the board when the central banks prints money.
When large amounts of money was printed in October to suppress rates, through open market operations, analysts also urged the central bank not to do it.
The earliest known price controls were imposed by emperor Diocletian who had to abdicate.
The main (Maha) rice harvest usually begins in February and supplies come in. (Colombo/Jan27/2025)
