Sri Lanka approves bill to increase fines by 3,900% as price controls trigger milk shortage

ECONOMYNEXT – Sri Lanka’s cabinet of ministers authorized changes to increase fines by 40 times as a price control agency triggered milk powder shortages from which an autarky tax was lifted as shortages persist in cooking gas.

Trade Minister Bandula Gunewardene said the fine would be increased by 3,900% to 100,000 rupees from the current 2,500.


Amendments to two sections of the Consumer Authority law, the main price control agency, have been drafted and will be submitted to Parliament.

“In particular, these amendments aim to provide the legal provisions necessary to control the sale of essential consumer goods at higher prices by certain traders beyond the controlled price,” said a government statement.

“As a result, the authorization of the Attorney General has been received for the bill prepared by the legal editor and the Council of Ministers has given its approval for the proposal filed by the Minister of Commerce to publish the bill in the Official Journal. and then submitted to Parliament for approval.

Minister Gunewardene said the fines would be used against rice fields and traders who sell prices above the check.

Sri Lanka is treading on the past of Roman Emperor Diocletian who in 301 issued a sweeping price control ordinance after debasing silver and gold coins by issuing large volumes of copper coins.

Sri Lanka printed large volumes of money, depreciating the currency and causing currency shortages.

When price controls are issued, supplies dry up, remaining stock is hoarded, and a black market is created.


As Minister Gunewardene increases fines by 3,900%, Diocletian decreed the death penalty instead of limiting the money issue by blaming traders for their “greed” and “untamed fury”

“But since it is the only desire of an untamed fury not to feel any love for the bonds of our common humanity; and since among the wicked and the lawless, it is considered, so to speak, the religious duty of a greed that swells and grows with fierce flames… ”, declared an Edict on the maximum prices engraved in the Pierre.

Sri Lanka’s central bank also continues to print money.

This week, the finance minister ordered a central bank lending program to grant loans to state-owned enterprises at 4 percent.

In 2020 and 2021, Sri Lanka’s central bank issued large volumes of money, mainly to pay civil servants’ salaries, which triggered currency shortages and depreciation.

The United States also prints money, pushing global commodities up in a so-called Powell bubble, including powdered milk.

Sri Lankan mercantilists had previously defended national money printing by saying the United States was printing money with no apparent problem and wondering why Sri Lanka couldn’t do the same.

Milk crisis

Powdered milk importers demanded a 200 rupee per kilogram increase as whole milk and skim milk prices skyrocketed, shipping costs increased and the Sri Lankan rupee depreciated under the weight of silver printed.

“We have been asking for this since January,” Lakshman Weerasuriya, committee member – Association of Powdered Milk Importers Association, told Sri Lankan TV Sirsasa.

“The reason we can’t maintain these prices any longer is that some time ago a kilogram of powdered milk was $ 2.80 and at the time the US dollar was Rs 182,”

“Now a kilo is worth 4.20 dollars and a dollar is worth 210 rupees. Because of this, in recent months these companies have suffered a loss of 1,500 million rupees per month by selling a kilogram for 945 rupees. Selling at a controlled price means we are losing 270 rupees per kilogram ”

Minister Gunewardene said the price control agency would not give the increase.

“Powdered milk companies have widely asked the consumer authority,” Minister Gunewardene told reporters.

“But we can’t do it when everyone in society is making sacrifices.

“When the market was normal, these companies made big profits for a long time. In the event of a pandemic, they should also take responsibility. “

“The easiest way is to raise the price by around 200 rupees and say continue with the supply, but this will greatly affect a larger group of the country’s population.”

Without powdered milk on the shelves, consumers now have to go without milk.

When world prices were low, Sri Lanka also maintained high domestic prices with an autarky tax to promote self-sufficiency.

This week, the cabinet of ministers decided to remove the autarky tax on powdered milk that gave high profits to national dairy companies.

Farmers and rent-seeking “import substitution” companies, however, are close to the political establishment, unlike competing importers.

The CAA previously created a shortage of canned fish and lentils during a lockdown and also disrupted the supply of vegetables and caused massive losses to farmers by punishing traders who bought goods at high prices on day one and were going out of business, critics say.

The CAA had also created a crisis in the gas supply by pushing Laugfs into bankruptcy.

It had in the past created cement shortages with its price controls. (Colombo / Aug011 / 221)

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