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Milk powder shortage to persist till price hike

24 Aug 2021

 
  • Importers refuse to budge from original stance 
  • Consumers inconvenienced by shortage
  • Importers deny hoarding allegations
  BY Cassendra Doole The existing milk powder shortage does not have a foreseeable solution for a long time, industry experts said, adding that this is mainly because the industry is unable to keep up with the rising prices and is currently running under heavy losses. Speaking to The Morning Business, sources from the industry said: “The main reason is that the importer prices have gone up since March this year from about 20%-30%. It is true that the prices have come down, but in comparison, it has still gone up by about 20%. The industry has been asking for a price revision from the government because obviously they have to profit.” Accordingly, with the current existing prices, they are unable to break even, let alone make a profit and this has reportedly created a shortage in the market. “It is very unlikely that this situation will be solved because we have been losing money for a very long time and since March now it’s been almost six months we’re losing money. So, we are not in a position to operate fully and that is why we have cut down the quantity.” Consumers have been complaining about a milk powder shortage in the market, regardless of a recent concession provided by the government where they eliminated the import tax on imported milk powder. The spokesperson also added that while the government has taken several steps to help out by reducing taxes, it is simply not enough to go on. The spokesperson went on to brief that global milk powder prices are on the rise while the Sri Lankan rupee is depreciating against the US dollar and global freight charges are considerably higher given the current global pandemic situation. “We are grateful to the government for reducing the taxes but it is simply not sufficient. With the dollar going up and the rupee depreciating at an unprecedented rate, we simply cannot keep up. The tax concession given by the government was Rs. 35 and the amount we spend per kilogramme is about Rs. 250. Obviously this does not tally, and we are unable to keep up with the losses.” Further, speaking about the rumours about milk powder being hoarded, the spokesperson said: “Some companies had stocks but were unable to sell due to the Covid situation and the lockdown imposed etc. but milk powder is not being hoarded.” Milk powder importers were given a tax relief of Rs.35 per kg, however, milk powder importers requested an increase of Rs. 200 per kilogramme to keep up with the rising prices. As the rupee depreciates, the industry is unable to keep up with the international prices, and companies are facing millions of losses per month.  Despite the Government’s move to remove import tax from milk powder, importers claim that removal of taxes alone certainly would not help their loss-making businesses at this point as they are in dire need of a price hike to make a decent profit.  The last time the imported milk powder price increased was in September 2019. Nevertheless, that price increase was, in fact, implemented under a milk pricing formula. Accordingly, the price of a 1 kg packet of imported milk powder was increased by Rs. 50, while the price of a 400 g packet was increased by Rs. 20. That pricing formula was amended by the previous Government into a simpler one, as it had been identified as too complicated. This newly implemented formula was scheduled to be revised quarterly based on global price fluctuations. Industry experts state that the country will indeed face a milk powder shortage with no foreseeable solution in the near future.  


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