Interviews

New methodology to control prices: Bandula Gunawardana

By Sarah Hannan

The country-wide protests that were launched last week highlighted the issue of the rising cost of living, amidst which many opposition political party leaders continued to question why the Government had failed to keep its promise of providing a solution. The Sunday Morning Hotseat this week reached out to Minister of Trade Dr. Bandula Gunawardana on what the Government has to say about the present economic climate of the country, and what measures are in place to bring the situation under control.

Following are excerpts of the interview:

Minister of Trade Dr. Bandula Gunawardana

How do you see the country’s cost of living at present?

In comparison to the situation that the country experienced in January, for the months of February, March, and April, we have been able to bring the price point to a stable one, and have reduced the prices of many essential goods. We have now adapted a mechanism where we have forward exchange agreements with the local manufacturers and direct importers of goods. This has allowed us to bring down the prices of several essential goods such as dhal to Rs.180-200; we have been able to maintain the maximum retail price of chicken at Rs. 430, which has at times even dropped to Rs. 400; and the maximum retail price for powdered milk which has been at Rs. 385 was maintained at Rs. 355.

From Monday (15), 1 kg of kekulu rice – red will be sold at Rs. 89, 1 kg of red onion will be sold at Rs. 195, and 1 kg of locally grown potatoes will be sold at Rs. 150. This is a new methodology that can be even used by future governments. This will improve the sales at Sathosa and co-operative stores, and increase their revenues.

I have even observed that privately-owned supermarkets also have offers noting the reductions in prices.

How do you respond to accusations that goods at the controlled price are only accessible at Sathosa and Q-shops?

The State’s supply chain of goods was completely sabotaged during the previous Government. Our administration wanted to rebuild that supply chain. There are about 3,000 co-operative stores and Sathosa outlets that are being added to the supply chain, and in the future, 1,000 Q-shops too will be added.

In addition to that, through the Ministry of Highways, a proposal was made to improve the livelihoods of 25,000 Samurdhi beneficiary families that are headed by females, who will also be provided with the necessary infrastructure to join the state supply chain.

Therefore, in the future, the public will have more access to state-owned convenience stores across the country. Come to think of it, even private supermarkets are not accessible everywhere in the country, and the Sathosa network has the highest number of outlets in the country.

There are many people who have suffered loss of income, or a slashing of it, due to the impact of Covid-19. These people are finding it difficult to cope with the cost of living. How does the Government plan to address this issue?

In other countries, the main focus is to reduce the number of deaths that are taking place due to Covid-19 complications. Countries such as the US, the UK, Germany, and France are considering the pandemic a global disaster situation.

What we are currently experiencing is way worse than the economic climate during the Second World War. It is unfortunate the people of Sri Lanka do not understand that even the global supply chain is completely handicapped, as factories have closed down, increasing the number of unemployed people.

The economic growth rate of the entire world has dropped by 4%, and in some countries that has even reached minus figures. Production has been crippled, since factories had to close down; airports and seaports too have imposed border restrictions.

The shipping sector is facing a shortage of containers, and a container that could be rented for Rs. 300 is now going at Rs. 1,200.

Our people are acting as if Sri Lanka is the only country in the world. People should look at this pandemic and the issues that came with it in a broad-minded sense.

Even in developed countries, you would see that airplane pilots are now working at gas stations. In those countries, millions of people have lost their jobs. In Sri Lanka, many of the migrant workers would be returning due to job loss.

Therefore, our Government is not in a position to offer further concessions.

Do you think that import restrictions and shortfall in local supply will have a further impact on food commodity prices?

We are unable to import goods, even if there is a shortfall of supplies. We do not have sufficient foreign exchange in hand to even purchase these goods. Therefore, no company is willing to give us goods on credit.

Contd. on page 18

During the previous Government’s tenure, they imported all types of goods including erasers, kites, and facemasks. How did they bring all these down without earning any foreign exchange? Over the period of 18 months, the said Government had gone to the international market and obtained loans at higher interest rates. With the issuance of sovereign bonds, that Government had a sum of $ 6.5 billion to bring down food commodities.

The same Government sold the Hambantota Port at $ 1.4 billion. In comparison to the value of the Port, the then-Government had spent four times more just to bring down food commodities.

Therefore, each year up to 2029, the debt service instalments that we have to pay cost up to $ 4 billion. While we have to settle that debt, we now do not have the foreign currency revenue that is generated through the tourism industry, while the foreign exchange that migrant workers used to send to the country has dropped. There is a reduction in the export orders that Sri Lanka used to get, which has affected export earnings. In such a backdrop, how are we to import goods that the public requires?

Since the prices for the list of commodities included has not been revised for some time now, looking at the official market basket, do we get the proper statistics on the cost of living and commodity prices?

It is the duty of the Department of Census and Statistics to revise these prices annually. No matter which government is appointed, that institution should continue to update the price lists and make the necessary amendments. There are specialists that have been trained to carry out the tasks, and they are supposed to carry out market surveys routinely. They are following a standard procedure when conducting such surveys.

There have been many reports of a sugar scam that has caused losses amounting to billions of rupees to the Government. Are there any moves to recover these losses?

It is only an allegation that a scam has taken place; if there was a sugar scam, the court would inform us about it. Then the Supreme Court will take up the case to identify the perpetrators behind the scam and charge them for such a financial crime.

What we did was to provide a concession to the consumer. That was not only done for sugar. We reduced the tax of dhal by Rs. 25, and are able to sell dhal at a controlled price. The tax component on red onions that was at Rs. 55 has been reduced to 25 cents, to offer the consumer red onions at the current rate. The tax on tinned fish, which was Rs. 100, has been brought down to 25 cents. So, taxes were reduced for several commodities. These tax concessions have cost the Government billions of rupees in losses.

When our Government was appointed, the Value Added Tax that was at 15% was reduced to 8%, which impacted the tax revenue of the Government; we removed the PAYE tax completely; then the income tax was brought down from 28% to 14%.

If the tax concessions to reduce the price of goods is considered a scam, then that should be proven in a court of law, and I am in no position to provide you an answer for that.

The Opposition has said that rice prices would continue to increase due to the oligopoly that is in place among three to four big mill owners. How do you respond to that?

If the Opposition is saying that the rice prices continue to increase, how are we then selling a kilogramme of kekulu rice, which was sold at Rs. 110, at Rs. 89? How am I selling a kilogramme of nadu rice at Rs. 96? I ask the Leader of the Opposition to go to Sathosa and see for himself.

There is a mafia behind the industry, which is why we have gazetted wholesale prices for rice, so that prices cannot be increased beyond that. If they are seen to be increasing the rice prices unreasonably, we will import 100,000 metric tonnes of rice and issue it to the consumers.

With the country switching to a production-based economy, the consumer has lost access to several essentials at an affordable price. How do you expect to change that?

That is a misconception. What we consider as essential, including rice, wheat flour, sugar, tea leaves, potatoes, onions, dhal, which are listed under the 27 essential goods, have been available to the consumer at a controlled price since February.

These allegations are part of a political agenda. If one can clearly see that the prices are controlled and if the Opposition is denying it, what does that imply?

Would the depleting foreign reserves have a direct impact on commodity prices?

It is not the depleting foreign reserves that are impacting the commodity prices, but the change in exchange rates. When the Mahinda Rajapaksa regime handed over the Treasury to the previous Government, the price of the US dollar was at Rs. 131, and at the end of its tenure, the price was at Rs. 182. That was one of the major downfalls of the economy of Sri Lanka. Because the price of the dollar went up, the price of the commodities too had to increase.

The exchange rate for the dollar, which was at Rs. 182, we managed to maintain at Rs. 193-195 after imposing import restrictions and limitations, and developing the export sector.

Therefore, if the exchange rate shows a downturn, then the cost of living increases. We have brought that under control using smart international market management strategies, and we will continue to maintain the rate of the US dollar below Rs. 200, and keep the value of the rupee stable even amid this pandemic.