- Pre-election request to be re-submitted
Local milk powder importers plan to request a price increase for imported milk powder from the Consumer Affairs Authority (CAA), the second such request to be made in the span of three months.
A well-placed source told The Sunday Morning Business that the initial request made in May 2020 was rejected in July by the CAA, with the reasons believed to be the looming general election and concerns about a loss of popularity for the Government.
Now that the election is over, the industry is set to make another collective request for the increase in the prices of imported milk powder to reflect the rupee depreciation-led losses suffered by the industry.
“We plan to make another appeal for a suitable price revision during the course of this month. Our initial request was reviewed during the election period, and usually decisions like this are not made during this time,” our source said.
The source stated that since the full Cabinet has now been appointed, the industry plans on making the necessary assessments to the appeal and make the recommendations. According to the source, several companies have already moved forward with their own request for a price increase from the CAA.
“We are suggesting that the Government either gives us a price revision or duty revision. In my opinion, having a duty cut would be a better option rather than a price increase, especially during this Covid situation.”
The request for an increase has been made mainly due to the increase of the dollar value since the Sri Lankan rupee depreciated at a dramatic rate, especially since March this year. Unlike many other industries, Covid-19 has not caused any significant impact to the business of milk importers.
The initial request for the price increase was sent to the CAA in the month of May, where the milk powder importers requested an increase in the price of a kilogramme of imported milk powder by Rs. 60-70. When they received no positive response for the request, the industry then planned to have a meeting with the CAA in the month of June, where they could discuss matters pertaining to the prices of imported milk powder and arrive at a mutual agreement.
It is notable that the increase in local milk powder prices, which are usually less than imported milk powder prices, on 1 May, brought their prices on a par with the prices of imported milk powder.
The industry was also requesting the Government to introduce a proper scientific mechanism or price formula for imported milk powder to reflect the global milk powder prices locally as well as to ensure periodic revisions without the intervention or requests from the industry to do so.
Furthermore, industry stakeholders believe that the prices of imported milk powder should be increased by a minimum of 5% every year and noted that the industry is not in favour of having price controls for imported milk powder.
The last revision to imported milk powder prices was made in December 2019, where the price of a 1 kg pack of imported milk powder was reduced by Rs. 40 while the price of a 400 g packet was reduced by Rs. 15. This revision was made to reflect the reduction of the Value-Added Tax (VAT) and the National Building Tax (NBT) announced by President Gotabaya Rajapaksa in November.
The last time imported milk prices were increased was in September by the former Government and it was made under a milk pricing formula. In September 2019, the price of a 1 kg pack of imported milk powder was increased by Rs. 50 and the price of a 400 g packet was increased by Rs. 20.
Industry sources noted that the milk powder pricing formula that was in use at that point was a trial formula for a period of one year and it is no longer in use, adding that it was anyway complicated and there was a need for a simpler formula. Even though the new Government has not been seen to be implementing the formula periodically, it is still unclear whether they have given up on it or not.
Repeated attempts by us to reach the CAA for a comment on the matter proved futile as we were told the relevant officials were not in office or at meetings on each occasion.