Rice and beer
Editorial-September 5, 2014
Economists may tell us that the phenomenon of sticky prices is not endemic to this country. That may be so, but, here, the price of rice is apparently stickier than those of other essential commodities. This situation is due to the involvement of some government politicians and their family members in the rice trade. There are a handful of mill owners who manipulate the rice prices through large-scale hoarding. It is only small-time traders who fear raids on their warehouses and prosecution. The so-called Millers’ Mafia has no such fears; it buys most of the rice harvest for a song through a well-established network and starves the market systematically thereafter so that the prices will not plummet even in the case of bumper harvests.
As if the problems caused by the Millers’ Mafia were not enough, breweries are now purchasing large stocks of rice for producing beer, we are told. Needless to say that it is not filling beer bellies that should be given priority but dulling hunger pangs.
The government, as a ministerial pundit audaciously declared in public recently, cannot control droughts, but hoarding and the bulk purchase of paddy for brewing beer are issues it is capable of tackling if it wills itself to do so. It is hoped that the people won’t be asked to drink beer if there is no rice. Once we had a minister of King Kekille’s calibre in the SLFP-led People’s Alliance government (1994-2001) who, having failed to import enough rice stocks in spite of warnings of an impending scarcity due to a crop loss, claimed rice was in short supply because Sri Lankans consumed too much of it!
The government’s paddy purchasing scheme is no match for the modus operandi of the Millers’ Mafia. There have been some complaints that the government buys paddy rejected by millers. If enough funds are allocated and the paddy purchasing system is placed in competent hands, the government may be able to protect the poor farmer as well as the hapless consumer. But, the question is whether it will ever want to do so at the expense of its ministers and their kith and kin.
Price controls alone won’t help bring relief to the public. There have been reports that some wholesalers have stopped buying rice because they cannot make any profits by selling it at the stipulated prices. The Consumer Affairs Authority (CAA) is being made to bite off more than it can chew where raids are concerned and it is apparently preoccupied with inspecting beauty parlours and canteens these days. However, it is not possible for the CAA to rule the rice traders with a rod of iron and force them to incur losses. Action, no doubt, has to be taken against hoarders and profiteers, but there is no alternative to boosting the supplies and taking on the Millers’ Mafia responsible for creating shortages.
Coconut prices, too, have gone through the roof because millers buy nuts direct from estates to produce oil, allowing only a fraction of the harvest to enter the market. Coconut growers also prefer to dispose their nuts in this manner though they sell them at lower prices than in the open market because of their longstanding agreements with millers who pay cash and buy nuts without rejecting smaller ones.
There has been a decrease in the paddy harvest in the drought-hit rice producing areas, and a drop in the supply inevitably leads to price hikes, but the massive price increases like the ones experienced at present could have been prevented if the existing stocks had been managed properly with action taken against hoarders, especially the big-time millers who have become a law unto themselves and enough rice stocks imported to meet the shortfall.
