People from overseas are often shocked at the price of food in Sri Lanka, visitors from as far away as England and Australia have been muttering darkly after a visit to the local supermarket. We usually reply that this due to inflation but think no more of it.
A friend of mine recently told me that the reasons for high prices are due to taxes and poor policy. Imported food is taxed (a lot of our food is imported) and this results in high prices in the local market. He gave me the example of coconut.
The Government has imposed heavy import duties on vegetable oils (soy, corn etc) thus driving up the prices of imported cooking oil. Local coconut producers thus find it more profitable to channel coconuts to oil production leading to a shortage of fresh nuts in the market resulting in coconut prices shooting up to Rs.60/- Will anybody with a coconut oil mill confirm this? The supermarket prices for coconut oil were between Rs.470-505 per litre (N'Joy and Cooks Joy) while vegetable oil ranged from Rs.425 upwards.
In the meantime, coconut producers seem to be doing fairly well, but not as spectacularly well as the nut prices suggest. One smallholder manages to still make a loss, but his holding (5 acres) is probably uneconomic and suffers from a high level of theft. Someone with a much larger holding (about 90 acres) says he is doing reasonably well, but I am not close enough to him to dig up detailed figures. again, anyone who can supply further information is welcome to do so.
Fish prices are supposed to be high due to tax imposed on canned Mackeral. The tax is supposed to be around Rs.100/- per can, a 450g can retails for Rs.215. People try to buy fresh fish instead and this pushes the fresh fish prices up. The customs website has some details of taxes, but is not detailed enough. Taxes on potatoes, onions and sugar have been revised a number of times.
The Gutterflower very kindly assisted me by compiling the prices of a few common foodstuffs in Delhi.
Indian Prices (converted to LKR @ 2.45 LKR = 1 INR)
Normal Rice 80.86
Long grain basmati 161.73
Yellow lentils 68.61
Red lentils 134.77
Chicken (whole chicken, approx) 367.57
Bread 31.10 (780g sliced bread INR 22, converted to a 450g price to make comparison easier)
Red Raw rice 56
White Raw 58
Mysore Dhal (small reddish grains) 168
Mysore Dhal (larger yellowish grains) 139
Bombay onions 74
Small onions 173
In terms of basic cheap rice, currently local prices are lower, although there was a time a few months back when they shot up to around Rs.100/- a kilo. In almost every other item the Indian prices are far lower than in Sri Lanka. Why this should be so is the question to which I have yet to find an answer.
What is especially interesting are the prices of onions and bread. Locally produced red onions are more than double the price of imported Bombay onions. The price of bread, thrice the Indian level is inexplicable, unless wheat is heavily subsidised in India. India does indeed subsidise wheat, the extent of which on a per kg basis I need to try and work out.
Surprisingly enough chicken prices are comparable although production in Sri Lanka should be more inefficient. Chickens are fattened on grain, it takes roughly 3.5kg of feed to produce a kilo of chicken, since this country does not produce enough grain, the bulk of the feed ingredients are imported. Therefore a producer of grain such as India should have an inherent advantage that should translate to lower prices. Many years ago when someone checked on the possibility of imported frozen chicken from India, selling prices in India were around 60% of the local cost of production.
These are just a few thoughts and I would appreciate any feedback that could explain some of these questions.
LBO has an interesting article on the revenue raised by food taxes, see here.