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Quick fix methods to hoodwink the public


Dr. P.B. Jayasundera and Nivard Cabraal

By Mandana Ismail Abeywickrema

The country's inflation rate is on an upward spiral while the government is engaged in quick fix methods to hoodwink the public.

The latest is to introduce a price index where real inflation is understated.

In a bid to control the rate of inflation cosmetically, the government last week called on the Department of Census and Statistics (DCS) to scrap the Colombo Consumers' Price Index (CCPI) completely and confine its statistics only to the new index, CCPI(N).

The CCPI recorded an inflation rate of 29.9% in April, which was expected to go over the 30% mark in May, especially given the recent drastic fuel price hike.

Not so surprisingly, CCPI(N) recorded an inflation rate of  26.2% in May. In April the figure stood at 25%.

Scrapping the old CCPI

Interestingly, the Department of Census and Statistics has been "requested" by the Finance Ministry and the Central Bank to completely scrap the old CCPI, which recorded an inflation rate of 29.9% in April.

"The Ministry of Finance and Planning as well as the Central Bank of Sri Lanka have suggested to the DCS to replace the old Colombo Consumers' Price Index with the new Colombo Consumers' Price Index with effect from May this year.

"The Department of Census and Statistics will update the Colombo Consumers' Price Index whenever a new Household Income and Expenditure Survey is conducted by DCS which is generally done once in five years," the DCS said in a statement.

Spiral wage inflation

Although the government worked hard to scrap the CCPI that showed actual inflation, the rate of 26.2% registered by the new index was still the highest in Asia.

The sustained increase in inflation and the cost of living have now created the possibility of the country experiencing the economic phenomenon known as 'spiral wage inflation.'

The new 'lower' level of inflation or understated level of inflation would also increase the real growth of the GDP.

Analysts say that even if one takes the new index as technically sound and better than the old one, the fact is that inflation has been in double digits for over 18 months now (in terms of the old as well as the new CCPI, which is unprecedented in the recent economic history of this country.

Macro-economic mismanagement

According to analysts, the unprecedented sustained rise in inflation is a sign of serious macroeconomic mismanagement by the government as well as the Central Bank.

Galloping inflation

Economists have however argued that while the CCPI was outdated as it was based on a 1952 market basket and was in need of revision, the DCS had developed the Sri Lanka Consumers' Price Index (SLCPI) a few years ago to compensate for that, and which was representative of the country as a whole instead of just Colombo as was the case with the CCPI.

They have also said that the CCPI (N) is not the answer to galloping inflation. The government has now scrapped the SLCPI as well.

With the most recent fuel price hike that has had a cascading effect on the prices of other consumer goods the country is now being pushed towards spiral inflation and it is high time that the government provides some solid solutions to contain the situation.

Private sector salary hike not due to Govt.

Private sector trade unions have alleged that the government has not taken any steps to increase the salaries of the private sector employees.

The JVP affiliated Inter Company Employees' Union (ICEU) has charged that the government instead of taking steps to increase the private sector workers' salaries, was staging a cover up by engaging in false propaganda saying that the salaries of employees would be raised by 25%.

JVP Parliamentarian and ICEU Secretary, Wasantha Samarasinghe has told the media that the wage control councils were now holding discussions to raise the current minimum salary of Rs. 5000 by about 15%.

Meanwhile, it was also said that the  government was planning on issuing a Gazette notification stating that the minimum wage of a company employee would be raised to Rs. 5,700 or Rs. 5,750 as decided upon by the wage control councils.

According to Samarasinghe, this salary increase was the result of an agreement between wage control councils and the trade unions, and was in no way a government salary increase and alleged that the government was trying to highlight it as a government initiative by issuing Gazette notifications.

Samarasinghe has further said that the ICEU proposed to raise salaries through the wage control councils only on the condition that the minimum salary should at least be Rs.12,500. Accordingly, the wage control councils of the Colombo Dockyards agreed to bring their minimum wagea up to Rs.12,500. This is only one example to show that these salary increases are not due to a government initiative, Samarasinghe said.

However, the ICEU has demanded that a salary increase should be implemented so that the working masses would be able to cope with the rising cost of living.

By the month of May 2008, the cost of living had reached 6734.7 - the cost of living has increased by 1558.3 points during the past year. The cost of essential consumer items has gone up by more than 100%. "Therefore, we emphasise that the salaries of private sector employees should be raised to a level, required for decent living," he has said.

Samarasinghe has also warned of stern trade union action by the first week of July if an acceptable solution is not presented to the private sector employees by then. He had also said that a poster campaign and a distribution of leaflets would be conducted in this regard and demonstrations would be held at workplaces.


Govt. bent on slashing fertiliser subsidy

The JVP says that any government that had tried to slash the fertiliser subsidy has been voted out of power.

The JVP affiliated All Ceylon Farmers' Federation  has said that the government was trying to  increase the subsidised price of a fertiliser bag from Rs.350 to Rs.1200 as a first step and then totally remove the subsidy.

JVP Parliamentarian and President of the Federation, S.K. Subasinghe has said that the government was preparing to slash the fertiliser subsidy.

"A few days ago several farmer representatives who could be manipulated by the government were called to Temple Trees and their statements were taken justifying the reduction of the fertiliser subsidy and wide publicity was given to it," he said.

Subasinghe alleged that the government has been trying to slash the subsidy for over a year now and that such attempts were prevented due to the intervention of certain farmer communities. "Currently, the government is trying to slash the fertiliser subsidy making use of the fuel crisis," Subasinghe has said.

Subasinghe has also pointed out that while the cost of living has increased by about 40%, the expenditure incurred to produce a good harvest through farming has increased by 50% to 60% and that the price of paddy has only increased by 10%.

According to him, slashing the fertiliser subsidy under such circumstances would be hard on the farmer. Subasinghe also said the ACFF has decided to launch an islandwide protest campaign against the government's attempt to first slash and then withdraw the fertiliser subsidy.


Fuel at concessionary price for ministers

The JVP last week accused the government of providing fuel at a concessionary price to the members of the foreign diplomatic missions and cabinet ministers while the people were left to bear the brunt of the fuel hike.

JVP General Secretary Tilvin Silva addressing a media conference said that a circular had been issued permitting members from the foreign missions to purchase fuel at a concessionary price.

"Accordingly they can obtain a litre of 90 octane petrol for Rs. 130 when the market price is Rs. 157 a litre. Similarly a litre of 95 octane petrol is sold for Rs. 142 when the actual market price is Rs. 170," Silva charged.

He also said that according to information received by the party, cabinet ministers also obtained fuel at these concessionary prices.

He charged that the government ministers were enjoying this benefit when the government has failed to grant a subsidy on kerosene at least to Samurdhi recipients who amount to two million of the population.

"If the government increased fuel prices in keeping with the world market prices, why cannot the diplomatic missions and the cabinet also purchase fuel at the current prices? The government is only finding an excuse for their unnecessary expenses. If the government removed the levy on fuel the prices would automatically come down," Silva added.


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