Despite heavy odds:

Lowering inflation further, Govt's aim

Irangika RANGE

Trade, Marketing Development, Consumer Affairs and Cooperatives Minister Bandula Gunawardana, in an exclusive interview with the Daily News, expresses optimism that the prices of goods would continue their downward trend, reducing the cost of living.

The Minister also says that the Government is in the process of providing a number of reliefs to benefit the public before the forthcoming Sinhala and Hindu New Year festival. He outlines plans to expand the Laksathosa and Co-op branches. The Minister says the UPFA is assured of victory at the forthcoming WPC election.

Q: Prices of several items have gone down. Will this trend continue?

A: The prices of a number of essential items such as dhal, B onion, red onion, sprats, gram, green gram, rice, sugar, potatoes, milk powder, canned fish and dried chilies have already gone down in the market due to the Government's removal of taxes on the imports of these 12 items.

The Government for the first time in the history passed the Special Commodity Levy Act in Parliament in 2007 as relief measure for consumers. Under this Act, a number of taxes such as Ports and Aviation Levy (PAL), Social Responsibility Levy, custom duty, surcharges, VAT and Cess Levy were removed on the imports of essential items.

The important point is when this Act was brought to Parliament, the Opposition voted against it. This attempt had shown their dislike to reduce burdens placed on the people.

But as a responsible Government, we are always committed to do our best to provide relief to the people and passed the Act by overlooking the oppositions' protest. With the implementation of this program, the Government has incurred a loss of Rs.10 billion to State revenue last year. This is equivalent to the total expenditure which can be made on Samurdhi beneficiaries annually.

Q: Will gas and fuel prices go down further?

A: We expect that the gas price would go down further following the gas price reductions in the world market. Even though gas prices have gone down in the world market, there was no proper mechanism to provide that relief to the consumer earlier.

Therefore, a gas price formula under the instructions of the Supreme Court after obtaining the approval of the Cabinet was formulated by the Consumer Affairs Authority. Under this formula, we evaluate gas prices to benefit the people following global gas prices fluctuations.

Accordingly, the total price reduction received by consumers during the last four months was Rs.790 from Laugfs and Rs. 554 from Shell gas. Last month, the price of a Laugfs gas cylinder (12.5kg) was reduced by Rs. 334 while the price of a Shell gas cylinder (12.5kg) was reduced by Rs.310.

The Government also reduced the price of a liter of diesel, furnace oil and petrol by Rs.40, Rs.37 and Rs.30 respectively through last year's Budget.

This move has resulted in reducing the cost of production and transport in various fields. This step has also positively impacted on passenger transport reducing bus fares by 15 per cent while certain reductions were seen in train fares too.

Q: Any possibilities of further reducing milk powder prices?

A: Relief has been granted to milk powder importers to prevent any negative impact from the world food crisis. Not only multinational companies but several local importers entered the milk powder imports following this tax relief.

This has resulted in reducing prices in the market. Meanwhile, to prevent the unfair price hike, the Government stipulated a maximum retail price of Rs.260 for a 400g milk pack since December 15 last year. It is almost a Rs.50 price reduction from each milk powder pack.

Apart from that a trend has been created to consume fresh milk as a result of several initiatives taken by the Government to popularize fresh milk among the public. Therefore, opportunities have been provided to consumers to purchase sufficient fresh milk through the outlets established countrywide.

Q: What are your plans to expand Laksathosa network?

A: Fulfilling another pledge given in the Mahinda Chinthana policy, the Government has come forward in distributing and selling consumer items by strengthening the Cooperative Movement.

As a result of the revival of this sector, the monopoly maintained by the private sector on selling and distributing of consumer items was broken. Sathosa which was driven to bankruptcy by the UNP was restructured by the Government. It commenced operations under the new vision. Today Laksatosa has 102 sales outlets operating across the country for the benefit of consumers.

In addition, 350 Coop-Cities have been set up islandwide including in the North and East using Rs.1 million for each Coop-City allocated through the Budget last year. Meanwhile, the Government has also planned to establish 1000 Mini Coop-Cities with financial assistance of Rs.300 million provided by the 2009 Budget.

Q: Will you find a mechanism to provide goods at cheaper rates to Northern residents?

A: The Government is actively engaged in fulfilling the needs of the people living in the North without any shortage.

Various steps have been taken under the instructions of the Senior Presidential Advisor Basil Rajapaksa MP to provide relief to people in the North who have undergone great hardships for many decades. Especially consumer items are being distributed through the appointed Essential Services Commissioner to the North without any delay.

In order to provide essential items at low rates, Laksathosa branches have been opened in the Province while new sales outlets will be set up shortly in the areas where IDPs are living. Sri Lanka State Trading (General) Corperation is also engaged in dispatching goods directly to them. Meanwhile, a mechanism has also been formulated to streamline the distribution of goods received from foreign countries.

Q: How do you plan to protect local farmers from cheap imports of various food items?

A: Several policy decisions have been taken to protect local farmers to prevent the influence of multinational companies and importers. The Government under the Mahinda Chinthana policy has vowed to protect the local production of dairy, paddy, grain, vegetable and fruits with the intention of making Sri Lanka self-sufficient. State initiatives taken to boost the local dairy industry which had collapsed when this Government came to power, have been successful.

The industry is being revived now with the implementation of a set of industry-friendly proposals to benefit the farmers to increase the milk production. Meanwhile, if certain imports threaten any local manufacturing, the Government directly involves through the imposition of tax on that item to protect local farmers.

We imposed taxes on several times when the local potato farmers were threatened by the potatoes imports. Government also provides a bag of fertilser at a low rate of Rs.350 to farmers. This fertilizer subsidy has resulted in the reaping of bumper paddy harvest across the country this Maha season. The farmers also obtain the best price of Rs.30 for a kilo of paddy for the first time in history.

Q: Will there be more economic centers in other parts of the country?

A: Initial work to set up several Dedicated Economic Centers (DECS) have commenced this year.

Therefore, a new DEC in Ratmalana is expected to be opened before the Sinhala and Hindu New Year festival as a relief measure for the people living close to the Galle Road. Meanwhile, Nine DECs in Dambulla, Nuwara-Eliya, Norochcholei, Kalpitiya, Thambuththegama, Meegoda, Welisara, Veyangoda and Narahenpita are operational at the moment.

Q: How is the Government controlling the rate of inflation?

A: The Mahinda Rajapaksa Government unlike previous Governments had faced a number of challenges from the four types of global crises fuel, energy, food and financial.

Despite these negative impacts, we have been able to reduce the inflation rate to 10 per cent from 28 per cent through good financial management. It is a big victory of the Government while combating terrorism in the North.

Our target is to bring down the inflation rate further to a single digit in the near future. Though this reduction had not been seen by the Opposition, people have really felt its benefit. That is why they come forward to offer their support to the UPFA during the past Provincial Council elections.