Rupee depreciation hits small importers | Sunday Observer

Rupee depreciation hits small importers

Small-scale importers are on the brink of closing down business due to the depreciation of the rupee and the Maximum Retail Price (MRP) on certain imported items, a spokesman for the Pettah Traders Association said.

He said its totally unfair for the policymakers to fix a controlled price on imported items when the rupee is allowed to float. Either the MRP must be lifted or the rupee must be stable for a healthy import market.

“In an open market economy price controls are not viable. Market forces should be allowed to determine prices,” importers said.

According to the Association many small time businessmen in Pettah who earn a marginal profit are unable to survive the double whammy and are contemplating to shut down businesses.

“We appeal to the policy makers to remove the MRP and allow market forces to operate which is more viable than imposing controls on a market that is determined by external factors,” the Association spokesman said.

Sri Lanka imports a large quantity of sugar, dhal, milk powder, canned fish, green gram and Bombay onions annually.

The depreciation of the Rupee during the past two years from Rs. 130 to around Rs. 153 at present has increased prices of imported items by around Rs. 15.

Importers said if MRPs continue along with the depreciating Rupee, cheaper and low quality products will flood the market.

“The Consumer Affairs Authority conducts raids to nab errant traders selling essential food items over the controlled price. This will result in a shortage of commodities in the market as traders are unable to sell items at a low price,” an importer in Pettah said.

The Importers Association has been lobbying for the removal of the MRP for a long time. The removal of the duty on sugar is a big victory for the Association.

The retail price of a kilogram of sugar currently is around Rs. 110.

However, consumers on the other end will have to pay a higher price if the MRP is removed. Prices of goods fluctuate based on supply and demand. Besides adverse weather such as drought and floods affect prices of commodities.

“What we request is not to impose MRPs if the rupee cannot be controlled. The government should make adjustments to the MRP according to the value of the rupee,” traders said.

Importers while appreciating certain reductions in the duty on commodities, call on the government not to have MRPs for imported commodities as prices of these items cannot be predetermined.

However, Minister of Megapolis and Western Development Patali Champika Ranawaka said the US Federal Reserve increasing rates by 25 basis pointst will have further pressure on the Rupee with foreign holdings going out to the US again. However, the MRPs are fixed to safeguard consumers from undue increases in prices of goods.

The Federal Reserve increased US interest rates by 25 basis points last week in its third hike since the financial crisis.