By Yoshitha Perera
[caption id="attachment_145616" align="alignright" width="275"]
"Even now, we are consuming rice and veggies cultivated using chemical fertiliser. Even next season, we would use chemical fertiliser, and it's only by next year’s Yala season that we are going to implement the organic fertiliser policy. It takes time to change a situation that has existed in history and we have to understand this theory"[/caption]
Along with the Covid-19 pandemic posting record numbers of cases daily, the cost of living that was already on the rise was further affected by the recent fuel price hike. The banning of chemical fertilisers, food shortage, and food security are some of the other pressing concerns weighing on the minds of the public.
In an interview with The Sunday Morning, Trade Minister Bandula Gunawardana spoke about the present situation in the country and the Government’s plans to overcome it.
Following are excerpts of the interview:
What is your take on the present situation regarding the cost of living?
Inflation is the main factor that affects the cost of living. It measures the increase in the price of goods and services. Rising commodity prices are a global phenomenon. The rise in commodity prices in a world market system is something we cannot stop. Cost of living can be controlled if a government can control inflation, but a government cannot stop the increase in prices of goods. In fact, a government intervenes to control the rate at which prices rise. The theoretical way in which a government can intervene is to keep the budget deficit below 5% and at the same time, we have to manage the aggregate demand.
These days, the cost of living the world over has increased, as there is an upsurge in the Covid-19 pandemic situation. The three main economic activities – production, consumption, and exchange – have been limited due to the current situation. Sri Lanka is highly dependent on imports from other countries. We need dollars for this importation but there is a shortage of dollars in the country due to the weakening of the tourism sector. Therefore, there is definite economic pressure in the country.
In our country, what’s lacking is an enlightening dialogue in Parliament on the world economic situation and the situation facing our country. The power of money lies with the Parliament and the Parliament decides the impact of the budget deficit on the people, but neither the Opposition nor other responsible officials can explain the situation properly in Parliament.
The previous Yahapalana Government came to power by increasing the salaries of the government employees. Due to this situation, last year, the present Government had to spend Rs. 1,052 billion on salaries and retirement pensions while the total annual income of the Government was Rs. 1,373 billion. This is the main problem, as spending two-thirds of the total income on salaries has further increased the cost of living. The Government imposes taxes on the people of the whole country and pays the salaries of public servants with the money received.
We have to spend the remaining Rs. 321 billion to pay the interests for the loans. However, the interest alone is around Rs. 900 billion. In the year 2020, there was not even enough to cover the expenditure incurred to run a government on a daily basis. Due to this situation, there has been no government in the country that did not take loans. I must say, the highest amount of loans had been obtained in a short period of time through the previous Yahapalana Government.
With the recent hike in fuel prices, how will the Government control the rising commodity prices and requests for price hikes?
We are controlling the price somehow; especially in Lanka Sathosa outlets, we are selling everything at a lower price compared to the current prices. For example, every household needs salt. But after the X-Press Pearl incident, smugglers speculated that there might be a salt shortage. They sold 1 kg of salt for Rs. 100. At that time, the price of 1 kg of salt cubes was reduced from Rs. 60 to Rs. 43. We reduced 1 kg of salt powder sold for Rs. 50 to Rs. 35.
We have taken steps to provide essential goods through Sathosa outlets at lower prices than the standard market prices. The prices of all food and other essential commodities are negotiated with the manufacturers, eliminating extraordinary profits, and selling products to a high standard through Lanka Sathosa. Due to this, a large number of consumers are coming to Sathosa. At present, the daily turnover of the Lanka Sathosa outlets has increased to Rs. 202 million.
Prices of vegetables and other essential items along with certain commodities fluctuate constantly and it is difficult to get a proper idea of the cost of living because it changes so often. What is being done to keep a controlled price for necessary items such as essential food items?
Those who own stores that sell five essential commodities – paddy, rice, maize, sugar, and milk powder – have to be registered according to Section 10 of the Consumer Affairs Act and we have provided them a time period. We are not increasing the control price of these essential food items. In Parliament, I stated that the fine will be increased to Rs. 100,000 for those who sell essential food items beyond the controlled price mentioned by the Consumer Affairs Authority (CAA) and that legal action will be taken against those vendors. The Cabinet had last week also approved 75 amendments to the Consumer Protection Act.
Why are we importing rice stocks? Is it because we do not have local stocks of rice in the country?
We are going to import rice to teach a lesson to those who sell rice at exorbitant prices and hide stocks. Recently, the price of rice has risen intolerably and we are hoping to take very strong action in this regard. We had called international tenders to import 100 metric tonnes (MT) of rice (nadu rice – 50 MT and samba rice 50 MT). We had called these tenders according to an international competitive bidding system.
I’m going to appoint a committee comprising the Secretaries of the Finance Ministry, Trade Ministry, Agriculture Ministry, Ports and Shipping Ministry, and Technology Ministry. Those five members have to consider the international tenders for the importation of 100 MT of rice. We are going to distribute the imported rice through Lanka Sathosa outlets and co-operative shops at a controlled price.
We had also found the reason why these vendors are selling rice at a high cost. There is a fine of Rs. 2,500 which has to be paid if they were raided. However, this amount is being paid by the mill owners, not the vendors. So, they are selling the rice as per their whims. Accordingly, by next season, we would decrease the price of rice to less than Rs. 100.
Is the rice that is going to be imported, produced using organic fertiliser?
We are now consuming rice made using chemical fertiliser. Even now, we are consuming rice and veggies cultivated using chemical fertiliser. Even next season, we would use chemical fertiliser, and it's only by next year’s Yala season that we are going to implement the organic fertiliser policy. It takes time to change a situation that has existed in history and we have to understand this theory. If there is a shortage of products made using chemicals, we will have to import the same products to manage demand.
After the recent flood situation and the banning of chemical fertiliser, there could be an impending reduction in veggies in the market. What’s the procedure to prevent such a shortage?
For a while, we have to import food grown using chemical fertilisers until the country becomes self-sufficient in organic fertilisers. The Agriculture Ministry will import essential chemical fertilisers for necessary cultivations and smugglers cannot operate the fertiliser field in the future. The Ministry of Agriculture has taken the responsibility of importing the required chemical fertilisers during the transition period to organic fertiliser.
How will the Government balance the demand and supply with the existing Covid-19 pandemic in the country?
The whole world cannot balance the demand and supply in the present situation since the supply chain has collapsed. World poverty has increased by one-third, so the need for a world conference to discuss this matter has now arisen.
With the travel restrictions, many families outside the city limits are struggling to get essential food items. What is the mechanism to address these kinds of issues?
There is no such struggle to get essential food items. We had opened all Lanka Sathosa outlets even with the islandwide travel restrictions. There is a shortage of mobile vendors and most daily wage earners cannot spend money to buy stuff from these mobile vendors. We are signing forward exchange agreements with the manufactures and deciding a fixed price for every essential item.
Mobile vendors sell goods according to their whims. What can be said about that?
Yes, there were certain incidents reported and we have taken measures to cancel their license through the district secretariats. There are a very limited number of good vendors who provide relief packages for the deprived families in this situation; there are some vendors who are violating the country’s law and selling their goods as per their whims. By now, good trade has broken down, that is why we are asking people to go to the Lanka Sathosa outlets. The network of co-operative shops has also broken down during the previous Government’s period and we have to re-establish it.
How will the Government ensure food security while safeguarding safety and quality of food items?
These are two difficult objectives and two challenges facing any government. So, we face it as a government. The President is a man who loves challenges, so he faces them.
According to reports, there is limited forex in the country which will suffice for three months. With this situation, how are we going to import essential items?
It has always been that way. If you have enough foreign reserves for about three months, that would suffice to manage the importation. In a country like Vietnam, this is even lower. This is why we have imposed import restrictions.
"Even now, we are consuming rice and veggies cultivated using chemical fertiliser. Even next season, we would use chemical fertiliser, and it's only by next year’s Yala season that we are going to implement the organic fertiliser policy. It takes time to change a situation that has existed in history and we have to understand this theory"[/caption]
Along with the Covid-19 pandemic posting record numbers of cases daily, the cost of living that was already on the rise was further affected by the recent fuel price hike. The banning of chemical fertilisers, food shortage, and food security are some of the other pressing concerns weighing on the minds of the public.
In an interview with The Sunday Morning, Trade Minister Bandula Gunawardana spoke about the present situation in the country and the Government’s plans to overcome it.
Following are excerpts of the interview:
What is your take on the present situation regarding the cost of living?
Inflation is the main factor that affects the cost of living. It measures the increase in the price of goods and services. Rising commodity prices are a global phenomenon. The rise in commodity prices in a world market system is something we cannot stop. Cost of living can be controlled if a government can control inflation, but a government cannot stop the increase in prices of goods. In fact, a government intervenes to control the rate at which prices rise. The theoretical way in which a government can intervene is to keep the budget deficit below 5% and at the same time, we have to manage the aggregate demand.
These days, the cost of living the world over has increased, as there is an upsurge in the Covid-19 pandemic situation. The three main economic activities – production, consumption, and exchange – have been limited due to the current situation. Sri Lanka is highly dependent on imports from other countries. We need dollars for this importation but there is a shortage of dollars in the country due to the weakening of the tourism sector. Therefore, there is definite economic pressure in the country.
In our country, what’s lacking is an enlightening dialogue in Parliament on the world economic situation and the situation facing our country. The power of money lies with the Parliament and the Parliament decides the impact of the budget deficit on the people, but neither the Opposition nor other responsible officials can explain the situation properly in Parliament.
The previous Yahapalana Government came to power by increasing the salaries of the government employees. Due to this situation, last year, the present Government had to spend Rs. 1,052 billion on salaries and retirement pensions while the total annual income of the Government was Rs. 1,373 billion. This is the main problem, as spending two-thirds of the total income on salaries has further increased the cost of living. The Government imposes taxes on the people of the whole country and pays the salaries of public servants with the money received.
We have to spend the remaining Rs. 321 billion to pay the interests for the loans. However, the interest alone is around Rs. 900 billion. In the year 2020, there was not even enough to cover the expenditure incurred to run a government on a daily basis. Due to this situation, there has been no government in the country that did not take loans. I must say, the highest amount of loans had been obtained in a short period of time through the previous Yahapalana Government.
With the recent hike in fuel prices, how will the Government control the rising commodity prices and requests for price hikes?
We are controlling the price somehow; especially in Lanka Sathosa outlets, we are selling everything at a lower price compared to the current prices. For example, every household needs salt. But after the X-Press Pearl incident, smugglers speculated that there might be a salt shortage. They sold 1 kg of salt for Rs. 100. At that time, the price of 1 kg of salt cubes was reduced from Rs. 60 to Rs. 43. We reduced 1 kg of salt powder sold for Rs. 50 to Rs. 35.
We have taken steps to provide essential goods through Sathosa outlets at lower prices than the standard market prices. The prices of all food and other essential commodities are negotiated with the manufacturers, eliminating extraordinary profits, and selling products to a high standard through Lanka Sathosa. Due to this, a large number of consumers are coming to Sathosa. At present, the daily turnover of the Lanka Sathosa outlets has increased to Rs. 202 million.
Prices of vegetables and other essential items along with certain commodities fluctuate constantly and it is difficult to get a proper idea of the cost of living because it changes so often. What is being done to keep a controlled price for necessary items such as essential food items?
Those who own stores that sell five essential commodities – paddy, rice, maize, sugar, and milk powder – have to be registered according to Section 10 of the Consumer Affairs Act and we have provided them a time period. We are not increasing the control price of these essential food items. In Parliament, I stated that the fine will be increased to Rs. 100,000 for those who sell essential food items beyond the controlled price mentioned by the Consumer Affairs Authority (CAA) and that legal action will be taken against those vendors. The Cabinet had last week also approved 75 amendments to the Consumer Protection Act.
Why are we importing rice stocks? Is it because we do not have local stocks of rice in the country?
We are going to import rice to teach a lesson to those who sell rice at exorbitant prices and hide stocks. Recently, the price of rice has risen intolerably and we are hoping to take very strong action in this regard. We had called international tenders to import 100 metric tonnes (MT) of rice (nadu rice – 50 MT and samba rice 50 MT). We had called these tenders according to an international competitive bidding system.
I’m going to appoint a committee comprising the Secretaries of the Finance Ministry, Trade Ministry, Agriculture Ministry, Ports and Shipping Ministry, and Technology Ministry. Those five members have to consider the international tenders for the importation of 100 MT of rice. We are going to distribute the imported rice through Lanka Sathosa outlets and co-operative shops at a controlled price.
We had also found the reason why these vendors are selling rice at a high cost. There is a fine of Rs. 2,500 which has to be paid if they were raided. However, this amount is being paid by the mill owners, not the vendors. So, they are selling the rice as per their whims. Accordingly, by next season, we would decrease the price of rice to less than Rs. 100.
Is the rice that is going to be imported, produced using organic fertiliser?
We are now consuming rice made using chemical fertiliser. Even now, we are consuming rice and veggies cultivated using chemical fertiliser. Even next season, we would use chemical fertiliser, and it's only by next year’s Yala season that we are going to implement the organic fertiliser policy. It takes time to change a situation that has existed in history and we have to understand this theory. If there is a shortage of products made using chemicals, we will have to import the same products to manage demand.
After the recent flood situation and the banning of chemical fertiliser, there could be an impending reduction in veggies in the market. What’s the procedure to prevent such a shortage?
For a while, we have to import food grown using chemical fertilisers until the country becomes self-sufficient in organic fertilisers. The Agriculture Ministry will import essential chemical fertilisers for necessary cultivations and smugglers cannot operate the fertiliser field in the future. The Ministry of Agriculture has taken the responsibility of importing the required chemical fertilisers during the transition period to organic fertiliser.
How will the Government balance the demand and supply with the existing Covid-19 pandemic in the country?
The whole world cannot balance the demand and supply in the present situation since the supply chain has collapsed. World poverty has increased by one-third, so the need for a world conference to discuss this matter has now arisen.
With the travel restrictions, many families outside the city limits are struggling to get essential food items. What is the mechanism to address these kinds of issues?
There is no such struggle to get essential food items. We had opened all Lanka Sathosa outlets even with the islandwide travel restrictions. There is a shortage of mobile vendors and most daily wage earners cannot spend money to buy stuff from these mobile vendors. We are signing forward exchange agreements with the manufactures and deciding a fixed price for every essential item.
Mobile vendors sell goods according to their whims. What can be said about that?
Yes, there were certain incidents reported and we have taken measures to cancel their license through the district secretariats. There are a very limited number of good vendors who provide relief packages for the deprived families in this situation; there are some vendors who are violating the country’s law and selling their goods as per their whims. By now, good trade has broken down, that is why we are asking people to go to the Lanka Sathosa outlets. The network of co-operative shops has also broken down during the previous Government’s period and we have to re-establish it.
How will the Government ensure food security while safeguarding safety and quality of food items?
These are two difficult objectives and two challenges facing any government. So, we face it as a government. The President is a man who loves challenges, so he faces them.
According to reports, there is limited forex in the country which will suffice for three months. With this situation, how are we going to import essential items?
It has always been that way. If you have enough foreign reserves for about three months, that would suffice to manage the importation. In a country like Vietnam, this is even lower. This is why we have imposed import restrictions.