Action against hoarders to protect consumers

The hoarding of essential food items by a few unscrupulous traders to create artificial shortages leading to panic buying by misleading the public made it necessary for the Government to interfere in the free market economy. The people watched the price increases of rice, sugar and other essential goods helplessly, wondering why the government did not take steps to check the alarmingly rising Cost of Living (COL) index.

Sensing the feelings in the country for strong action, the Government enforced Emergency Regulations to counter the hoarding of sugar, rice and other essential foods. President Gotabaya Rajapaksa activated the Emergency Regulations to stop hoarding and price hikes of essential goods as per the powers vested in the President under the Public Security Ordinance. The essential food items covered by the regulations include rice, paddy and sugar and traders will be banned from all unfair practices such as hoarding, creating artificial shortages, selling at exorbitant prices or above the Maximum Retail Price (MRP), thereby imposing additional burden to the public.

Hoarding is commonly known for creating shortages of goods in the real free market economy. Economists point out that it is possible for hoarding to create a cycle of speculation, self-fulfilling prophecies, and inflation. While it is an economic crime to resort to hoarding, the magnitude of the crime further increases considering the hardships currently faced by the people due to the COVID-19 pandemic. Resorting to hoarding of essential goods at a time when many daily-wage earners cannot afford a square meal because of loss of income is indeed an unpardonable crime.

If several crafty traders start hoarding rice, sugar and other essential items, the prices will begin to increase. Then other middle-level merchants will notice, and then they might hold back supplies of those goods in anticipation of future price increases. That is enough to raise prices again. Panic buying may create real shortages of these essential goods. Economists pointed out that in such a scenario, the poorest in the country could even be at risk of starvation if the cycle continues beyond that point.

Hence, Government intervention has been hailed as a correct move to prevent artificial price hikes and provide relief to consumers. Laws are often passed against certain types of hoarding to prevent tragedies and reduce economic instability. If a speculator intends to corner or otherwise monopolize a commodity, then it may be considered an illegal act. Unfortunately for traders and regulators, it is sometimes difficult to distinguish hoarding from unlawful attempts to manipulate the market.

In his Address to the Nation last month, President Gotabaya Rajapaksa pointed out that close to 4.5 million self-employed personnel and daily-wage earners have become helpless since they lost their sources of income completely. “Amidst all these obstacles, we also had the responsibility to keep the people alive. We did not abdicate that responsibility,” he assured the people.

He warned those who attempt to make hay while the sun shines, saying, “Do not attempt to destabilize the country.” He appealed to the people to support the actions taken by the Government as, “at this crucial juncture, everyone should take the country forward strategically by acknowledging the gravity of the situation.”

The Government was compelled to enforce regulations to prevent hoarding of essential goods mainly due to recent artificial shortages of sugar and rice leading to the skyrocketing of prices. Last week stocks of rice and sugar hidden in unauthorized warehouses were confiscated. State Minister of Cooperative Services, Marketing Development and Consumer Protection Lasantha Alagiyawanna said that 5,400 metric tons of sugar imported at 25 cents duty a kilo had been detected in three separate warehouses.

The detections were made amidst a shortage of sugar in the market with the price of a kilo of sugar rising above Rs. 200. The Finance Ministry reduced the duty on a kilo of sugar from Rs. 50 to 25 cents by issuing the Gazette notification 2197/12 on October 13, 2020. The State Minister said that the identities of the importers were known.

Prior to that Consumer Affairs Authority (CAA) officials discovered illegal rice storage stocks in Polonnaruwa, Ampara and Anuradhapura. Trade Minister Dr. Bandula Gunawardena stated that fines against traders who sell rice at higher rates have been increased to Rs. 100,000 from the previous Rs. 2,500. The Minister stated that six warehouses that hid over four million kilograms of rice have so far been discovered and sealed by the CAA while those selling rice at higher rates are being fined. Subsequently, while investigating rice hoarding in Ampara, the CAA discovered one million kilograms of rice that were being kept as an ingredient for the production of beer. CAA Chairman Major General (Retd.) Shantha Dissanayake said that storing of rice, other than for human consumption, is prohibited, which means it cannot be stored as animal feed or to be used in other products.

The hoarding of essential goods by unscrupulous traders was reported from several other countries in Asia in recent months. Pakistani Prime Minister Imran Khan ordered officials to launch a crackdown against those traders involved in hoarding essential commodities such as wheat, sugar and rice. The Prime Minister instructed the provincial Governments in Pakistan to control prices and increase the supply of essential goods and urged them to ensure the continuous availably of essential goods in the market.

Similar emergency regulations against the hoarding of rice and sugar have come from Vietnam and Philippines too. Philippine President Rodrigo Duterte declared a nationwide price freeze on basic goods and warned that hoarders would “be dealt with accordingly”. Duterte’s declaration of a state of public health emergency to control the COVID-19 pandemic included the price freeze. “The Department of Trade and Industry is closely coordinating with other Government agencies, manufacturers and retailers of basic goods to ensure availability and a continuous supply of basic goods in the market,” Trade Secretary Ramon Lopez said in a statement.

In Thailand, rice millers have resorted to hoarding rice stocks to force the Government to increase prices. The paddy prices are far above current market rates, and Thai millers have been stocking up on paddy in the hope of earning huge profits later this year. The paddy is largely kept at millers’ warehouses. High pledging prices also induce traders and millers to buy low-priced grain smuggled in to Thailand from neighbouring countries to earn huge profits.

President Rajapaksa’s decision to enforce Emergency Regulations on essential goods will have to be followed by revision of fines and prison terms for hoarders and unscrupulous traders. State Minister Alagiyawanna said that the issue at hand would be discussed with the Attorney General’s Department. He said the current fines were not at all sufficient and heavy fines should be prescribed for hoarding and the maximum prison term too must be increased from the current six months imprisonment.

In accordance with the Gazette notification individuals who stock essential goods will have to register themselves with the Consumer Affairs Authority. This will prevent them from hiding the stocks. Accordingly, importers, producers, mill owners, collectors, store owners, distributors or wholesale sellers will not be allowed to keep the aforementioned essential food items in their possession without being registered with the CAA.

Earlier, CAA Chairman Major General (Rtd.) Shantha Dissanayake said that that importers, producers, mill owners, collectors, store owners, distributors or wholesale sellers are required to provide information on the product stocks in their possession to the CAA when asked.

“The Right to Food is a fundamental human right,” President Rajapaksa said in his Keynote Speech at the Pre-Summit of the UN Food Systems Summit in Rome in June. Addressing the Summit from Colombo, he said, “Even as Governments act individually to safeguard this right for their people, they must broaden their understanding of the complexities of the global food system.”

He emphasized that, “the challenges ahead are daunting,” but said with confidence, “however, Governments must be unwavering in their resolve to overcome them.” 


– Daily News Sri Lanka

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