ECONOMYNEXT – Many of Sri Lanka’s groceries are no longer selling red rice after price controls were imposed and strictly enforced by the Consumer Affairs Authority as import controls reduced the supply of other varieties.
Sri Lanka has higher rice prices than the rest of the world due to import taxes and licensing, but rice stock run low in December and January ahead of the main rice harvest in February.
Sri Lanka usually cuts import duties and allow imports especially in January to keep rice prices down.
However, this year, the tax was not removed, though imports were allowed, keeping prices high. Meanwhile authorities also accused millers, who are protected with the import duties, of hoarding rice.
On top of that price controls were imposed on many varieties of rice.
“Red raw rice is not available anymore,” one trader said. “I could not get white rice either.”
A shortfall (or alledged hoarding) only leads to a higher market clearing price, and leading to consumers adjusting consumption and moving to alternatives, such as eating more bread for some meals.
But price controls tend to by boost demand and reduce supply. They also create black markets.
“Until a few days ago there was keeri samba raw rice, now that also disappear fast, because normal red rice is not available,” another shop keeper said.
Keeri Samba raw rice ((a type of smaller premium rice) had a price control of 260 rupees a kilo, compared to 210 for standard red rice.
There are some red rice available with wholesalers at around 260 rupees and he brought some earlier due to customer requests but it is too nerve wracking to sell, another shopkeeper said.
“If I sell from the back and they (Consumer Authority) find it they confiscate it and fines me,” he said.
“So I do not want to bring any.”
Some people still bought standard red rice over keeri samba raw rice, he said.
“Those who eat red rice eat red rice, those who eat keeri samba eat keeri samba,” he said.
When goods disappear from shelves due to price controls, consumers are more upset than if prices were simply higher.
“I wanted to take some raw rice today,” one shopper lamented. “I take a three wheeler with the rest of my groceries. Now I will may have to come again.”
In Sri Lanka raw rice is an important ingredient for making milk rice on January 01.
Sri Lanka’s then rulers went on a frenzy of price controls on a number of goods in 2021 but abandoned them after severe shortages emerged in basic foods. The administration was eventually driven out of office.
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