World Affairs








Up, up and away

Bandula Gunawardena

By Mandana Ismail Abeywickrema

Sri Lanka seems to be well and truly spiraling into an abyss of staggering price hikes culminating in a skyrocketing cost of living.

The latest price hikes have been on fuel and rice.

The shocking extent of the rise in rice prices was witnessed last week when a kilo of rice was being sold at Rs. 100 in some areas. The growing dissension among the public however forced the government to take some measures to arrest the situation.

President Mahinda Rajapakse immediately summoned the rice importers for a meeting to resolve the issue. The importers informed the President that the rice shortage was created due to a decision by the government to limit rice imports to the country in order to pave the way for local farmers to sell their produce at a reasonable price.

Govt. blamed

The importers blamed the government for the shortage and in order to find an immediate solution to the problem, the President requested the relevant ministries to make necessary arrangements to import rice.

Trade Ministry Secretary, Dr. R.M.K. Ratnayake told The Sunday Leader that the price of rice would stabilise within the next two weeks once the shipment of 30,000 mt of rice arrives in the island from Pakistan. (See box)

Meanwhile, the fuel price hike also came as a shock. The latest hike in fuel prices has irked the masses, as it was made soon after the government gave an assurance that there would be no price hikes for at least a few more months.

The government froze fuel prices in July last year. It was part of a policy decision of the government, which said there would be no increase in the prices of fuel, water and electricity till the end of 2007.

Apart from the masses, the unions too have voiced their disapproval over the recent price hikes. Unions of the Ceylon Petroleum Corporation (CPC) have charged that the government was in a position to sell a litre of petrol at Rs. 112 inclusive of all current taxes.

According to the unions, the reason the CPC was not willing to sell petrol at a lower price was because of the heavy losses incurred by the institution due to its long standing debts from other state institutions.

Not for turbine oil

Another allegation leveled against the government by the unions is the fact that while the price of kerosene was increased, the turbine oil price, which was similar to the kerosene price, was not increased.

They charged that since aircraft used turbine oil, the government did not want to increase its prices as it would not be helpful to Mihin Air.

However, the government has responded by saying that the even after the recent price hike, the CPC was still incurring a loss of Rs. 1.2 billion per month.

Petroleum Resources Minister Duminda Dissanayake told The Sunday Leader that even after increasing fuel prices, the CPC was incurring a loss of Rs. 10 on a litre of diesel and Rs. 23 on a litre of kerosene.

However, he said that the CPC was gaining a few rupees on petrol sales and that was being used to set off part of the losses incurred by the CPC.

When asked as to why the petrol consumers are being taxed in excess, he explained that the CPC sells 140 million litres of diesel per month while only 60 million litres of petrol are being consumed by the people each month.

Negative impact

"When you compare the numbers, you see the negative impact that an excessive hike in diesel prices would have on the economy as opposed to petrol. By selling diesel at a Rs. 10 loss, the overall loss incurred by the CPC amounts to Rs. 1,400 million and an even larger amount is incurred as losses due to the sale of kerosene at a lesser price," he said.

However, responding to the allegation of not increasing turbine oil prices, Dissanayake denied it claiming that the turbine oil prices were increased according to an international pricing formula and that it was increased several times last year, even when the price freeze was imposed on other petroleum products.

"Since last July, the CPC did not make any price adjustments in fuel and the losses incurred were not subsidised by the Treasury. Due to the rising global oil prices, the local fuel prices had to be adjusted and the recent hike came after several months and the CPC is still incurring losses," he said.

Be that as it may, it is the ordinary people who are at the receiving end, being slapped with constant price hikes causing an endless list of burdens. This has now become the striking feature of the "New Sri Lanka" promised by President Mahinda Rajapakse in 2005 on assuming office.

"Cheap "Cheap rice coming"

Trade Ministry Secretary, Dr. R.M.K. Ratnayake said that the price of rice would be stabilised within the next two weeks.

He said that the country has already received a shipment of 10,000 mt of ponny samba from India.

He also said that prices would stabilise once 30,000 mt of rice is imported from Pakistan within the next two weeks. The government is to spend a sum of US$ 6 million to import rice from Pakistan.

Responding to the allegations leveled against the government by rice importers that they were prevented from importing rice, Dr. Ratnayake said that the traders were given enough time to import rice.

He also said that if the government flooded the market with rice now, it would then have an adverse impact on the local farmers when their produce came into the market.

According to Dr. Ratnayake, once the prices were stabilised, a kilo of samba would be sold at Rs. 45-50 while others like kekulu and nadu would be sold at around Rs. 30.

However, he said that people could purchase a kilo of ponny samba at Rs. 52.50 from any Cooperative or Lak Sathosa outlet.

Dr. Ratnayake said that once the Maha harvest came into the market, the prices would further stabilise. 

Brace for bread at Rs. 100

Trade and Consumer Affairs Minister Bandula Gunawardena last week said that no one would be able to prevent a loaf of bread from rising to Rs. 100.

The irony is that it was Gunewardena who in early January said that the prices of essential items would be stabilised by April. Even in an interview with The Sunday Leader, he said that the government was in the process of taking necessary steps to reduce the prices of essential items and maintain them by April.

However, last week he stated that a loaf of bread might increase to Rs. 100.

At the rate the price of wheat flour is rising not even Vaima the son of Sakka can stop the loaf of bread rising to Rs. 100 in Sri Lanka in the future, Gunawardena was reported in the media as saying in Kandy last Monday (14).

Minister Gunawardena was opening a Cooperative Medical Centre in Kandy when he said that it was not that easy to bring down the price of commodities when goods are going up in price in the international market.

Anyone can draw cartoons against the cost of goods going up. Any one can put up posters and paint walls calling for the price reduction of consumer goods. But none of those tactics can bring down the price of goods, he has said.

"If I can bring down the cost of goods so easily, I need not wait till I am ridiculed so much," Gunewardena has also said.

He said the farmer would be given all possible facilities and encouragement to produce agro based goods. The international trend at present is to encourage agriculture. The cost of living and prices of consumer articles could be brought down only by the production of agro-based goods, he said.

The Minister said that steps were being taken to make arrangements to reduce the price of rice in the market in the near future.

JVP's hot air

The JVP that decided to abstain from voting at the third stage of the budget after heavily criticising it since it was presented in parliament last November has now charged that the government was not keen in providing any real relief to the masses.

The government last month thanked the JVP for its decision to abstain from voting at the final stage of the budget, which they said helped save the government.

Since the passing of the budget, the burdens on the masses have increased four fold with the steady increase in the cost of living. The escalating prices of essential items has made the masses find fault with the JVP, supposedly 'the common man's party.'

Now, one month later, true to its Jekyll and Hyde nature the JVP is booming again, criticising the government's handling of the cost of living issue.

The JVP has charged that the government was trying to fool the masses by attributing the fuel price hike to defence expenditure and the global market prices without highlighting the heavy expenses incurred by the state to maintain a large number of ministers.

Issuing a statement on the increase of fuel prices the JVP has stated that the government was trying to capitalise on the rising global market prices than looking in to the welfare of the people.

The JVP has stated that the government by attributing the rise in fuel prices to the war and the increase in global fuel prices has tried to conceal from the people the expenses the state has incurred in maintaining a large cabinet, the money spent on their perks and the corruption and waste in the government. Ironically it is this very same government the JVP opted to retain at the last budget.

The Marxists have also accused the government of increasing the prices of fuel that had been purchased several months back at a much lesser price.

"The government that is unable to manage the escalating cost of living or providing relief to the masses can only entertain the masses with its large cabinet. The ministers who are ignorant of developing the country or bring relief to the people through their portfolios perform this act of being jesters quite well. However, these pranks and foolishness don't bring relief to people. If the government doesn't realise that when the stomach is empty, the mind too would become vacant and the day the masses decide to topple the government would not be far away," the JVP statement said. 

Mahinda's record

President Mahinda Rajapakse has become a record holder.

From the day petrol was brought to Sri Lanka up until the time Rajapakse took over in 2005 its price had risen to only Rs. 60 a litre. However in a matter of just two years Rajapakse as President and Finance Minister has managed to more than double the price to Rs. 127 a litre.

That by any standard is quite a record in economic management.  


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