This
is another smoke and mirrors job to fool the masses, as people are very easily
taken for a ride by just numbers that don’t mean anything on their own. The
intellectualy challenged who really think they know more because they just hang
their pea brains on just one point, being blinded to the reality around them, have
been led astray by articles of dubious repute, and instead must be looked at in
context. Just like the fact that the previous government used US$4Billion in
reserves just to protect the rupee that should have been left to depreciate and
find its natural level, (meaning its intrinsically realistic value) bearing in
mind the real factors of the economy. Therefore it is rich of the former
Governor of the CBSL to find blame, in his FT article yesterday, in an exchange
rate drop whose history was directly related to his inactions during his tenure
in borrowing heavily, externally to prop a worthless currency.
So
it should be with sugar.
Due
to various production subsidies by the Government and favorable growing conditions,
India is now the world’s largest producer of sugar, for at least 2018, and is
sitting on a ton of sugar that it knows not what to do with.
We
have sugar importers who are a mafia and got their tentacles in the government
and so will not permit the Government to do a deal with India, to buy sugar
cheap to reduce their surplus, as there is big money at stake.
If
I was running Sathosa and I purchased 100,000 Tonnes of sugar and begin selling
it with the government taxes of Rs45 after the recent increase, for a total
price of Rs100, where Sathosa will have Rs15 profit ALSO, it is going to be
sabotaged by the mafia as being anti competitive or equivalent. However as most
of the sugar was purchased pre cess increase this should be sold at Rs85/kg
instead, but is not. The lowest I have found is Rs100 today.
One
must remember that the GOSL takes a while to get their act together. This
increase in the sugar cess by Rs15 was long awaited as the world market prices
had plummeted a long time ago, and the Sugar Mafia had imported the sugar at
the lower prices in large quantities before the increase in Cess. So just by
holding onto the stocks they are making a killing, of billions in fact.
6 comments:
In this era of price volatility, the consumers of Sri Lanka are in a lose lose situation. When prices drop in the world market the wholesale traders DO NOT reduce the price. They act as an oligopoly and keep the prices high as they all make huge profits.
The GOSL knowingly or unknowingly are very slow to act, and they increase the cess, seeing that the traders are making so much money by not reducing the price. Then they tell the traders NOT to increase the price at the Supermarket, because this is effectively a tax on them, but not as they have already purchased 6 months stock WITHOUT CESS
When they increase the cess, only the small traders who buy small quantities suffer, as the mafia is informed much in advance of the government actions and may even bribe the relevant govt officials to delay the cess increase so they can get their imports at the lower price.
So not only the GOSL losing in tax, the consumer is also losing in lower prices, and worse, this time they were threatening to pass on the cess to sugar to increase the price of sugar to an unprecedented Rs135. So the MAFIA stand to make at least Rs70 profit on a kilo of sugar, as they have not paid the higher cess because they imported the sugar before the increase. Rs40 cost, Rs70profit for Mafia, Rs20 for previous cess, and Rs5 for the retailer margin.
According to Statistics - CBSL 2018 book of ecomonic stats 2018 page 85 SL imported Rs39B of sugar, Rs48B of Milk products, and Rs46B of Rice added makes 133B just short of a billion dollars! Tragic
I should have mentioned above that the imports of wheat and maize from which flour is made was Rs54B and I did not see it because it was in intermediate goods imports and not consumer goods as it has to be made into flour. but that added is a huge cost for 4 basic items. Let us hope that at least the rice import can down to zero this year!
It is clear from the above that world market prices of these imports fluctuate and the government uses its price mechanism to keep the price to consumers stable. However as their ability to act is full of fraud and bribery, where all importers are informed in advance prior to acting on taxes, the traders make sure they make the money, not the govt. on the benefit of taxes imposed when world market prices fall. Of course the converse arises when it goes up, with the cess falling to keep the consumer prices stable.
The mafia then is not sugar only, but Milk powder, like Anchor, and potato, onion, flour, where billions are made at the expense of the consumer and they are only worrying about a falling exchange rate! What fools!
who are the people in control of these trades involving the daily staples of Lankan life. They should be the richest in Sri Lanka. Name names as the public is interested.
Thank you for sharing this informative blog with us.This is really helpful and wonderful blog. keep sharing these kinds of blogs.
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