Sri Lanka flirts with flour price controls as inflation rages

Oct 03, 2007 (LBO) – Sri Lanka consumer affairs ministry said it was amending laws to bring a Singapore-owned flour mill under its control as rising global wheat prices drove bread prices in the island to record levels. Consumer Affairs Minister Bandula Gunewardene said the law governing the country's consumer protection authority has a specific provision allowing Prima to raise flour prices without state approval.

"We haven't yet accepted the position, but that is what the firm told us when we asked them to come to us for permission," Gunewardene told reporters.

Wheat flour prices are hot political issue in Sri Lanka. In 1994 a government came to power on the promise of giving bread at 3.50 a 450 gram loaf at a time when it was priced at 5.50. At the time the rupee was 49 to the US dollar.

Now a loaf of bread is priced around 30 to 35 rupees and the government has printed enough money to drive the rupee down to 113 to the dollar in the intervening period.

Last week wheat flour price was raised by 13 rupee to over 60 rupees a kilogram.

Legal Options

Gunewardene said changes to the law are being drafted to bring Prima under the control of the consumer authority.

Minister Gunewa