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Not-so-merry Christmas for consumers?

12 Dec 2021

  • Purchasing power drops, as scarcity drives up prices
  • Weak govt. policies leave consumers at mercy of price gouging and middlemen
  • Fertiliser crisis leaves fewer vegetables on plates
  • Retailers confident about festive season uptick in sales, worry about 2022
  • Gas cylinder issue spurs sales of electric ovens and cookers in urban areas
By Maneesha Dullewe With the festive season approaching, consumers have raised concerns about pandemic uncertainty, expected shortages, and price inflation. With inflation rising to 8.3% in October 2021 from 5.5% a year earlier – according to the Department of Census and Statistics (DCS) – the price of many items may well be out of most shoppers’ reach. Furthermore, the food industry has been grappling with supply chain disruption and harvest losses, and grocery prices have continued to rise, causing families to spend a greater share of their income on food. Considering the prospect of Christmas in line with the public’s purchasing power this year, National Movement for Consumer Rights Protection Chairman Ranjith Vithanage said: “Costs of essential goods have increased at unprecedented rates. While Sri Lankan consumers purchase clothes and household appliances towards the end of the year, even the prices of these items have increased unnaturally. Some goods are completely unavailable, like hot plates and electric stoves.” He acknowledged a pervasive feeling of uncertainty for the upcoming season, saying: “The Sri Lankan consumer is facing a situation where they can’t even fathom celebrating the festive season. We ask the Government to become attentive to this situation and investigate accordingly and make decisions that will bring relief to the consumers.” Impact on grocery bills Due to the rising prices of food staples like rice and wheat, coupled with higher farming costs, food inflation (year-on-year) increased to 11.7% in October 2021 from 10% in September 2021, according to the latest figures from DCS reports. Vithanage explained that at present, inflation outweighed income growth: “We can see how the purchasing power of consumers has gone down when we consider the difference in the amount of goods we used to be able to purchase with Rs. 2,000 then and now. Buying some groceries used to cost around Rs. 600-700. Furthermore, there are goods that are not essential but still necessary, which we are also unable to purchase.” He added that under these circumstances, “consumers can’t purchase the items they require as they desire. They can only set aside a limited amount and purchase a limited quantity of goods due to the price increases. Therefore, the festive season will present an unbearable situation for the consumer. This is a very regrettable situation, since people will not be able to fulfil any of the hopes they had with the festive season”. Vithanage said that the prices of goods had increased further due to the Government’s free hand policies and expressed regret over the Government’s management of the situation. He alleged that the Government was not intervening sufficiently to provide relief to the people in the matter of rising vegetable prices or middlemen and large multinational companies exploiting consumers. He asserted that this policy did not suit a country like Sri Lanka, since “cunning” businessmen drove up prices of goods when there was no corresponding increase in production factors. When contacted, a Consumer Affairs Authority (CAA) source responded that it was no easy task to implement a maximum retail price (MRP) under conditions where there was a scarcity of certain goods, from milk powder to gas, in the market.  The CAA source noted that the upcoming festive season would cause increased consumer spending patterns, with purchases of clothes and electronic goods being notable.  Adding to the prevailing economic anxieties are the fears over the new Covid-19 Omicron variant and potential further lockdowns. On the flip side of the issue, Manning Market Traders’ Association Secretary Chaminda Peiris reasoned that, given the recent issues with rains and fertiliser, as well as potential restrictions due to Covid, vegetable prices would not see a significant reduction. Regarding pandemic-induced economic downturns, he said that the market had been open continuously only in recent times, since Covid precautions that were in place had compelled them to open the market every two days until then. However, if the Covid situation was to worsen, the subsequent drop in wholesale trade due to a reduced daily supply of goods by traders would drive up prices. Despite the volatile nature of vegetable prices at present, Peiris noted that there was no way for the Government to implement price controls. “Vegetable prices don’t depend on us. If you take dry food such as rice and coconut, we have confirmed statistics about how much is being stored and how much is being released to the market. However, if we take a certain cultivation, not even the farmers themselves can estimate the amount of harvest that can be sent to the market. It could be that only 50% of the harvest produced can be supplied,” he said. Therefore, it is impossible for the Government to impose an MRP on vegetables since wholesale trading was too volatile, with the vegetable prices changing based on circumstances.  He concluded: “When price controls are imposed, it creates misunderstandings in society, that traders are artificially inflating prices through a mafia. However, this is not what happens, since the daily price depends on the products that come in and the traders.” Non-food retailers in good cheer? On the other end of the trading spectrum, Sri Lanka Retailers’ Association President Hussain Sadique shared a more buoyant outlook on the economic activities of the festive season, although noting that they expected an overall decline in consumption. He said that, while there were no shortages of stocks in general, there were certain goods that had high demand while their availability was low, artificially driving up prices. Giving the vehicle and hardware markets as examples, he said that the scarcity of such goods was born out of import restrictions and the dollar shortage. As such, there were fewer products available, but the consumer demand remains. “Based on that, I can see that some of these traders have adapted to this to make up more margins.” When queried whether the upcoming festive season would give a boost to the retail industry, Sadique said: “The industry has bounced back (already). We are now concerned about the first quarter of 2022. If there is a sudden change in the pandemic situation, we will be back to square one and the economy will go down. But I don’t think there will be a major decline, because people have got used to this situation; it’s not like the first lockdown or the second. We have now adapted and have experience, and are now ready to live with it.” He also noted that due to the recent issues with gas cylinders and ensuing safety concerns, “the consumer electronics sector will definitely benefit, (through sales of) electric ovens, etc., since people will go for (electrical goods)”. He did not believe there would be any shortages of such products, noting: “They’ve been having high sales. Actually, that sector had a very good year.” Since people started working from home, items like mobile phones, laptops, and cooking appliances have been in demand, as the utilisation of such items for day-to-day use has increased. Attempts to contact the Ministry of Trade for comments proved futile.

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