No Business Like Govt. Business

Government’s involvement in business is distorting the market mechanism, a corporate manager told this newspaper.  There are now rumours afloat that the Government is going to buy bank Lanka Indian Oil Company plc (LIOC), he said. LIOC Managing Director Suresh Kumar was not immediately available for comment as he was overseas.
LIOC is going through difficult times because the state controlled Ceylon Petroleum Corporation is selling fuel as “subsidized” rates, distorting the market mechanism, as globally, petroleum prices have been on the rise.
This source is involved in the export of value added ceramicware for which industrial gas is an essential raw material. His company buys this gas from LAUGFS based on a pricing formula.
But with LPG becoming increasingly costly, a new source of supply is being seemingly opened up for this company with the Government owned Litro Gas Company (formerly Shell Sri Lanka) offering the same at a competitive price, placing LAUGFS, which bases its pricing of such as per market conditions, in a quandary.
Litro bought Shell Lanka’s shares for over US$ 60 million from its parent company recently.
The source exports his products mainly to the EU. “But that region is yet to get over the recession,” he said. On the other hand the local tile market is booming, he said.
“Government’s involvement in the health sector is another distortion of the market mechanism,” he alleged. Lanka Hospitals (formerly Apollo) allegedly keeping rates unchanged is a problem for private sector hospitals to increase their rates in keeping with inflation, the source said.
The other market distortion is the army being involved in the sale of vegetables, he said, referring to the army’s involvement in the sale of vegetables in Colombo and in the suburbs.
On Friday when this reporter passed that outlet in Dehiwela from which the army usually sells vegetables around 8.30 AM by bus, he saw a queue gathered, waiting for the army vegetable sellers who had yet to make their appearance. One and a half hours later when I passed that way again, the queue was there, diminished to about half, but no army vegetable sellers in sight.
A few days previously when I asked a soldier involved in this operation as to how he liked his new role, his reply was that they were acting under the orders of the President.
“Now we are being utilized to provide these services,” he said.
I saw five uniformed, but unarmed soldiers involved in this business at that outlet at that time.
I asked him whether his vegetables were cheaper than that which were available in the market?  “I don’t know, he replied, but there are queues to buy our vegetables,” the soldier said.
There was a small queue gathered at the vegetable counter then, with some five soldiers in number conducting the business. Most of their vegetable baskets appeared to be empty, with that which was visibly available for sale being cabbages and lime.
When I passed that way an hour earlier in the bus on that day, the queue seemed to be longer.
The soldier to whom I spoke to said that he had formerly served in Jaffna. He said that they get their vegetables from army headquarters.
The army had some 200,000 soldiers in its roll at the time it recently and successfully concluded its war against terrorism, probably an excessive number to have during peace time.
The problem however in demobilizing the army is to find them alternate sources of employment. Probably sounding out the international donor committee to equip the excess soldier cadre with life skills, so that they could stand on their own two feet in the event of demobilisation might be an option to follow.
But then how good is Sri Lanka’s diplomatic relations with the traditional donor community, the West and Japan? With the Chinese bringing down their own labour for Chinese funded projects here, that may be a pointer that it’s not worth pursuing the China option for such an operation, if indeed the Government is toying with the demobilization option.