Thursday, December 9, 2010

Here we go again with re-imposition of Price Controls on the sale of Rice

Today’s papers announced the establishment of a high powered Cabinet Sub-Committee on Cost of Living, chaired by the President, with 15 Cabinet Ministers and including the Prime Minister. Concurrent to this following on from the import of Chicken and Eggs recently announced, they have imposed price controls on Rice, the single most essential ingredient in the diet of the average person.

One does not stick a bandage each time the wound bleeds, one has to find out why it is still bleeding and try to prevent the causes, like controlling the diabetes!
I have intimate knowledge on Paddy and Rice as I am a farmer who grows more varieties of Paddy than anyone else I know and converts that into multiple varieties of Rice and sell it direct to consumers, so I have both a stake in this subject and an opinion on what needs to be done, without this unforeseen edicts from above.
I know from my area, a lot of paddy was purchased by the state at the guaranteed prices from the last harvest, as the market price was lower. However some of the paddy was substandard, due to moisture levels being higher and were purchased not having regard to basic norms for storage. Now 70,000 Tons of paddy will be released from these stores, to be converted to 45,000 Tons of rice. This will then be issued to the market. I dread to think how much paddy will have to be thrown away due to substandard that may not even be good enough for animal feed, as that is what happens when the paddy spoils it ends up in Chicken Feed.

By imposing price controls on the most popular varieties of rice, the best quality of these will go underground, or the millers will not produce them. In my case, there is no incentive for me to spend the extra money, get the paddy par boiled to a high standard, by a neighbor, so I can sell quality Nadu, that tastes good, and sell at a loss for the Govt regulated Rs60/- a kg. Especially these days with wet weather, sun drying this is out of the question, and the risks associated with getting the required quality are not worth taking when losses result in so doing.

It is typical of leaders who don’t understand supply and demand, who try to control prices and thereby reduce the choice to the consumer, and put the producer in jeopardy, when in fact their whole focus should be to improve productivity, which helps both producer and consumer. A government whose slogans are “rata hadamu, api wawamu” should take heed from a farmer, and not from price controls, that further impoverish the retailer and producer with the real culprit the big miller again set to cash in from the failure to issue paddy from the stores earlier. Why wait till now when prices began rising a month ago, due to non release of paddy stocks by Govt.


thekillromeoproject said...

Yet another example that shows the powers that be have no clue as to what this country needs. Good luck to you.

Anonymous said...

in your previous post about milk, you were for price controls- you wanted a minimum price to help farmers increase milk production.

in this post, you are against price controls because it "reduce the choice to the consumer, and put the producer in jeopardy".

2 different commodities, but both are essential goods. so are you really against all kinds of price controls? (in which case your opinions in the 2 posts contradict each other) or is it that you support the gov setting price floors and not price ceilings?

Rajaratarala said...

in an economy where the whole emphasis is to encourage the production of a series of food items that are determined both to be essential and produce able then a price floor must be set, not a ceiling.Rice, Milk, Corn, Sugar, Poultry products come into this category in SL. The import cost of the above amounts to over Rs50B

Then there is the flour import which is not substitutable, and requires a more reasoned blog entry

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