Sri Lanka relaxes rice price controls

April 22, 2008 (LBO) – Sri Lanka has lifted price controls on the rice wholesale trade, a top official said, ending a short-lived socialist experiment not seen in the country since the heavy money printing and control era of the 1970’s. Trade ministry secretary R M K Ratnayake said a decision had been made to lift controls from the wholesale trade and the move would have legal effect by mid-night Tuesday.

Controls at retail level would remain.

The decision came after representatives from the rice trade met consumer affaires minister Bandula Gunewardene, he said.

Sri Lanka’s rice trade was beginning to be disrupted with the main wholesale market running out stocks. Price controls usually create ‘black markets’ and ‘shortages’.

But many retail shops were selling above the controlled prices over the past week and weak enforcement of the law prevented widespread shortages of rice and ‘blackmarkets’ which are an inevitable consequence of price controls.

People who impose price controls, usually those in government on salaries paid through the taxes and inflation of citizens in productive sectors, believe that prices rise because producers make ‘unfair’ profits.

They usually make the claim that ‘unscrupulous’