The cost of bread just went up by another 7.5 per cent or thereabouts from Monday. Consumer price hikes are masquerading as VAT, profits taxes and what-have-you. This followed Prima pushing up the price of a kilo of wheat flour by Rs 7.20 to pass on the government imposed tax on wheat grain imports last week. We're playing around with phrases to do with Value Added Tax, profits taxes here.
The current fact is that global prices for wheat are falling drastically as has been the trend since the government first took office in the initial 100-Day Programme and immediately decreased the import tax concession from Rs 10 to Rs 4 a kilo resulting in Prima increasing the price of a kilo of flour by Rs 7.20 which unleashed price hikes for bread and a whole lot of wheat flour based foods which hit the consumer badly.
A world price drop must result in a price decrease for the consumer. Else, your economics is flawed, very badly. The government is getting its wires crossed in its panic to increase its revenue and has simply added yet another burden on the consumer under the disguise of reducing import tax concessions one year and falling back on the lame excuse of giving farmers an indirect boost by discouraging flour imports and bread consumption.
This is the type of rationale that comes out of the wrong end of a bull. Scared of the socio-political fallout from a direct price hike, yet another burden has been dumped on the voter. Budget 2016 conveniently 'failed' to include all these factors in the way of consumer price hikes which the Opposition would have relished. There was the VAT 'afterthought' after Budget fever had waned.
This is yet to be felt and identified as VAT is passed down to the consumer in a score of consumer items which we use at home or pay for in the shop and eating houses. It's anyone's guess as to what price hikes the Bakery Owners' Association members and non-members will pass on to buns and fast-foods , all of which will amount to an average Rs 500 increase in the average man's cost-of-living a month.
Translate that into price hikes in eating houses which serve rotis, string hoppers, hoppers etc and you and I could be finding ourselves Rs 2,000 out of pocket a month apart from anything between Rs 2,000 to Rs 5,000 on other essentials including medicines and imported nutritional supplements for the sick, kids and the elderly as they pass on VAT to every product we buy. According to the NCPI, "For February 2016, the value change decrease of food items was mainly due to the price decreases in vegetables, rice, green chilies, big onions, etc.
However, increases in value change were recorded for dried fish, fresh fish, papaw, sugar, mangoes and garlic due to price increases of these items compared to the previous month (January). It's a pipe dream to expect Prima to cut back on imports because the consumer is never going to change his preference for bread as a preferred dietary choice. Prima re-exports flour to Indonesia and does not have to pass on any burden to the Lankan consumer.
To cut a long story short, this government and all its predecessors have been lacking the gumption to kick Prima out entirely and allow the Sathosa or any agency under the Trade Ministry to become major players in the Wheat Flour market, while private sector players can be allowed a role to help maintain market forces which can be monitored and controlled in the interests of the consumer.
The consumer is sick and tired of excuses and false justifications. To permit a market monopoly that militates so aggressively against the consumer is highly unconscionable. To subtly increase burdens on the consumer is more unconscionable. This is a far cry from the visions of Shangri-la dangled before the nation's eyes by the concept of Yahapalanaya. The government has two sensible and logical choices before it if it's sincere about keeping its pledges to the people: 1. End the flour/wheat monopoly 2. Impose a price control on flour and its products, [bread etc].