Price increase in milk powder a must say importers

By Senashia Ekanayake

REPRESENTATIVES of all leading milk powder importing companies met the media yesterday and asserted that unless the CAA granted the required minimum Rs. 50 price hike requisition, further orders would not be placed and the country would experience a shortage of milk powder almost immediately.

From Left: Milgro Country Manager Chrishantha Fernando, Nestle AVP Marketing Asoka Bandara, Maliban CEO Lukshman Weerasuriya, Fonterra Finance Director Janaka Gallage, Fonterra HR & Corporate Relations Director Roshan Kulasooriya, Millers Limited Executive Director Delano Dias - Pic by Daminda Harsha Perera

Senior personnel from Maliban, Nestlé, Milgro, Fonterra and Diamond gathered last afternoon and explained that a price revision was vital as a result of the rapidly increasing global prices. Nestlé Marketing Assistant Vice President Asoka Bandara noted that the price revision to Rs. 248 in June 2010 was a consequence of world prices, “Likewise local prices too must rise on par in the event of a price increase internationally.” The global price of one metric tonne of milk powder was on a steady rise from $3,200 to the present price of $4,430. Despite having continuously appealed for a price increase for nearly a year, the Consumer Affairs Authority (CAA) had not granted the price increase sought. A spokesperson for the Commerce Ministry told Daily FT that the Authority had been instructed to look into the matter and the request was now being “studied.”

The head table went on to say that unless and until an immediate price revision is made the companies would no longer place orders for imports as it would further worsen the impact caused. The milkmen predicted that any shortage occurring due to a delay in the authorities making a decision on this matter, would persist for approximately two months.

Maliban CEO Lukshman Weerasuriya on behalf of all present expressed his gratitude towards the tax concession granted earlier this year. However the escalating global prices and stagnant local prices resulted in the company nearly losing Rs. 590 million a month. Those present highlighted that companies such as Kotmale had to stop importing. At present the ratio of imported milk to locally manufactured milk powder was approximately 85:15. It was also noted that the production capacity of inland cows was not as high as those in countries such as Australia, “While they produce nearly 45 litres of milk from one cow, Sri Lanka’s maximum capacity is 18 litres.”

The companies have begun to feel the need for a price increase even more as a sequel to global calamities that have taken place. While Japan is now entirely dependent on imported milk powder due to fear of radiation, a country once self-sufficient in milk; India too has begun to import.  When asked about maintaining a buffer stock, the representatives of milk importing companies stated that it would cost nearly Rs. 2.5 billion. However it was stated that companies stock a maximum of two weeks’ requirement and the retailer a week’s requirement. Sri Lanka is one of the highest milk powder consuming nations with its monthly consumption being 5,600 metric tonnes.