Sri Lanka hikes milk powder taxes as world prices fall

June 4, 2014 (LBO) – Sri Lanka has hiked import levies on milk powder by 56 percent keeping prices high while world prices continue to fall, giving more revenue to the state. Amid competition cement prices however came down as clinker prices fell, and is now being retailed 15 to 20 rupees below the government mandated price of 923 rupees per 50 kilogram pack.

State intervention in prices has intensified in recent years disrupting markets and price signals preventing prices from coming down fast when global prices adjust.

Analysts say the state has also depreciated the currency from 110 rupees to the US dollar to 130 pushing up prices and destroying the real salaries and accumulated savings of the people in 2012, leading to weak consumer spending.

The milk powder shortage early in the year had also hit sales of tea in the country, according to retail market sources. In Sri Lanka milk powder is used as a whitener for tea and is also used by poorer people who do not own refrigerators.

Yesterday bulk milk powder prices fell 4.2 percent in New Zealand. New Zealand prices have fallen 25 percent since peaking in February.

The New Zealand dollar has also bee