The Hon. Wasantha Samarasinghe - Minister of Trade, Commerce, Food Security and Cooperative Development

¶ 01 Hon. Presiding Member, the reply to the question raised by Hon. Amila Prasad Siriwardena is as follows.

¶ 02 We discussed this in Parliament today and on several other occasions. During Adjournment Questions today, the Hon. Member asked six questions. His first question is what factors were considered in deciding a profit margin of Rs. 5.00 for retailers.

¶ 03 Hon. Member, although the verbal answer is a bit long, I will explain. Rice has inelastic demand. In our country some people eat rice three times a day, Hon. Presiding Member. Therefore, consumers require around 2.5 million metric tons of rice per year. Also, about 1.2 million metric tons of flour are consumed. So typically two rice meals and one flour meal a day is the pattern.

¶ 04 Recently, several factors influenced a severe shortage in this inelastic demand. The government had not purchased any stock. If it had, stocks were sold out before we came to government. The stores were empty. There was no buffer stock to intervene against market mafias. Therefore, on the President’s intervention, we tried several times to engage local millers to increase market supply. But we could not sustain it. They stuck to their positions. We gathered a lot of information. There was an MRP set—revised in November 2022—of Rs. 220 per kilo of rice. However, though the MRP was Rs. 220, shops were invoiced at Rs. 219 per kilo; even wholesale supply invoices were Rs. 219. Yet rice was unavailable. Therefore, we had to make a decision.

¶ 05 In some mills in Polonnaruwa, Nadu rice was released at Rs. 255 per kilo. I am speaking about Nadu rice. In our consumption: 65 percent Nadu, 15 percent Samba, 15 percent Kekulu (red and white), and 2-3 percent Basmati and specialized hotel varieties. This is the consumption pattern.

¶ 06 We had to make a decision on rice pricing because of these realities. The retailer could not sell other goods, and footfall declined. A good example is Sathosa. Over past years, Sathosa’s losses total Rs. 21 billion. Daily sales dropped by Rs. 15–17 million because customers did not come when rice was not available. Everyone needs rice, but margins on rice are small. When customers come for rice, they also buy coconut, oil, spices and other items. Considering all this and how rice prices are set in the market, the Consumer Affairs Authority conducted a survey and social analysis, and based on all that, we determined two prices: a wholesale and a retail price. Accordingly, we set these prices. Then another problem arises. Large millers handle around 30–35 percent of the market; the remaining 65 percent is with small and medium millers. Now the miller has become the wholesaler. Instead of supplying to Pettah or economic centres, millers supply directly as wholesalers at Rs. 215 per kilo to wholesalers. Then to resolve this, if rice leaves Polonnaruwa to Pettah at Rs. 215, beyond that we would have to set four different prices—for the intermediate wholesaler, for the suburban wholesaler, and then to the retailer. We cannot set four layers of prices. Therefore, under the Consumer Affairs Authority and its Consumer Services Council, we called the rice millers and importers, obtained all views, and determined the published prices. Under that we set a Rs. 5 margin between wholesale and retail, for both retailer and wholesaler. That answers your first question.