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Milk powder importers demand phased out price hike

24 Sep 2021

 
  • Government decision to be made today
  • Original demand Rs. 350; Govt. considers only max Rs. 200
  • Importers suggest Rs. 200 first; another Rs. 150 later as compromise
    By Shenal Fernando Milk powder importers have demanded that the Government increase the maximum retail price (MRP) of 1 kg of imported milk powder by Rs. 350, The Morning Business learns. However, according to industry sources, the Government has refused to allow such a significant price hike considering its adverse effect on the consumer. Nonetheless, according to statements made by the Government, they are willing to grant approximately half of the demanded hike; between Rs. 175 and Rs. 200. According to sources, as a consequence, milk powder importers have amended their demand, and are now seeking a phased out price hike, involving a Rs. 200 price hike now and a further price hike of Rs. 150 on a later date. State Minister of Co-operative Services, Marketing Development, and Consumer Protection Lasantha Alagiyawanna stated earlier this week that a decision to increase the prices of milk powder, wheat flour, gas, and cement will be made during the course of this week. These remarks were made when Alagiyawanna was questioned by the media about such matters at the opening of a new Sathosa Q-Shop outlet in Fort. “We will have to increase prices to a certain degree with the rise in prices in the global market. We will reach a final decision on the prices of rice, wheat flour, milk powder, gas, and cement this week,” he said. Milk powder is considered an essential item in Sri Lanka with price controls imposed by the Government; the price of 1 kg of milk powder is Rs. 945, while the 400 g packet is priced at Rs. 380. The price of imported milk powder was last increased in September 2019; this was done through the milk powder price formula that was implemented under the former Government. Accordingly, the price of a 1 kg packet of imported milk powder was increased by Rs. 50, while the price of a 400 g packet was increased by Rs. 20. With global milk powder prices and shipping costs increasing, along with the depreciation of the Sri Lankan rupee (LKR) against the US dollar (USD), milk powder importers have suffered losses since March 2021 and have repeatedly requested for a price revision. Moreover, in June 2021, milk powder importers collectively requested a price hike from the Consumer Affairs Authority (CAA), citing reasons such as the depreciation of the rupee. However, this was not approved by the CAA. As a consequence, a shortage of milk powder emerged in the market as milk importers started taking measures to ensure survivability. In response, the Government removed import taxes levied on milk powder imports. Nevertheless, this measure was described as inadequate as it only amounts to a Rs. 35 reduction – Rs. 15 in import duty and Rs. 20 in Ports and Airports Development Levy (PAL) – while value-added tax (VAT) is not exempted. It is reported that the final decision on the price hike will be taken after the Cost of Living Committee meeting scheduled to be held with the CAA today (24) at Temple Trees.


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