- Govt. losing revenue with shortage of several high-tax products due to hoarding
- Manufacturers say distribution continuing as usual despite shortage
With the price of several essential items increasing exponentially after the Government let go of price controls, traders have begun hoarding stocks of several high-tax and subsidised products anticipating further hikes and looking to make significant gains.
This situation adds to the revenue pressures the Government is faced with, as hoarding could potentially create artificial shortages and reduce tax returns to the State. At present, traders have commenced hoarding goods such as cigarettes and fertiliser, anticipating a major price increase or the Government to do away with subsidies in the upcoming budget.
A spokesperson for Ceylon Tobacco Company told the Daily FT that despite the reported shortage of cigarettes in the market, the company continued to produce and supply the market as usual.
Despite the speculation by several parties on a possible price increase in cigarettes, including the Chairman of the National Authority on Tobacco and Alcohol, there has been no official statement by the Government to confirm or deny it, further worsening the situation.
This was echoed by representatives of CIC who stated that stocks of approved fertiliser had been released to the market as usual, and there was no real cause for any shortage of standard fertilisers in the market.
With the 2022 Budget to be presented in Parliament on 12 November, this represents a significant period of time whereby the Government will incur significant losses due to speculation by vested parties. The State should consider quelling speculation prior to the budget to avoid any further shortfalls and disruptions to the market.
On Saturday the Government issued a gazette announcing the removal of price controls on LP gas, flour, milk powder and cement, leading to significant changes in the price of goods. A rise in the price of fuel is also anticipated this week.