Import restrictions lifted, but importers say complex factors influence high price of goods
Although import restrictions were lifted for textile products, ceramics, and electrical devices this week, prices remained unchanged.
The government issued a gazette extraordinary, dated Monday, October 9, to lift import restrictions on all items except vehicles.
Items such as men’s, women's, and children’s clothing, household electronic items, bathware, air conditioners, refrigerators, freezers, and washing machines can be imported. Restrictions on soaps, shampoo, and some food items were also lifted.
However, people complain that both retailers and wholesalers are less concerned about reducing prices.
Consumers added that most businessmen claim they have old stock and are unable to sell at current prices. Some merchants would not comment.
Mohomed Shakir, a manager of an electronic retail shop in Kollupitiya, told the Sunday Times that as the Cabinet decision was taken last week, it was too early to comment.
He said that to study the change in prices of electronic goods, at least three weeks are needed. He said removing restrictions can affect shop owners in different ways, as the ones who have old stock would be forced to reduce prices, while those who are ordering goods now can get lower prices.
However, consumers say that merchants increase prices when restrictions are imposed and are very reluctant to reduce prices when imports are allowed.
Sihan Senaratne, the owner of a Borella electronic shop that specialises in parts and circuitry, said the US dollar rate is a factor.
There are only parts worth Rs 100 to 1,000 available in most shops, as the same high-quality products are available for Rs 5,000, he said.
A mobile phone that was earlier sold for Rs 50,000 is now available for Rs 150,000, but it is the same model, not a new one.
He added that most imports are of low quality because consumers are unable to afford the original products.
“Though good-quality items are available, our importers buy low-quality, cheap parts.’’
High taxes and the US dollar exchange rate are discouraging importers.
Importers and businesspersons have explained that lifting restrictions alone won't reduce prices. This is because current stock was imported at higher prices due to elevated exchange rates, increased global raw material prices during and after the COVID-19 pandemic, and freight rates.
Notably, both local and global economic, social, and political factors contribute to pricing.
Anuruddha Wijeratne, the Managing Director of the clothing store Lady J, noted that consumers should not expect an immediate reduction in the prices of imports.
Remaining inventory prices have stayed high due to higher exchange rates, elevated global raw material prices, and supply chain disruptions.
While the removal of items from the suspended list might theoretically increase supply and potentially reduce prices, other global and local factors can still impact prices by the time the products reach Colombo, likely a minimum of two months from now, he added.
He said factors such as exchange rate fluctuations, supply chain challenges, and geopolitical concerns, including recent tensions in West Asia, how superpowers respond to them, Sri Lanka’s debt restructuring, and IMF assessments, can all influence exchange rates at the time of goods arrival in the Colombo port.
Mr. Wijeratne said the exchange rate, raw material availability and prices, and freight charges are the primary drivers of import price increases. Despite increased import availability over time, price reductions remain subjective.
To address import price issues and supply chain disruptions, he said they strategically localised his company's supply chain and opted to import raw materials instead of ready-made garments, with exceptions for products like salwars, sarees, items for infants, and others.
The lifting of import restrictions would also benefit the markets and provide government revenue, former parliamentarian and UNP working committee member Mohomad Shafeek Rajabdeen said.
He is also the Chairman of Rajabdeen & Sons (Pvt) Ltd., which imports sanitary ware. He said the government’s move would help large-scale importers while also allowing customs to earn revenue.
“There were some people illegally bringing hand bidets and shower heads in baggage and selling them for higher prices. Now these activities will be discouraged as the whole set of items will be available at a reputable importer.’’
He added that prices would eventually drop and stabilise.
Meanwhile, Seewali Arukgoda, media spokesman and Director of Customs, said: “First the importers would talk with suppliers and place orders; that would take at least another two weeks; then only we would be able to calculate if there has been an increase or decrease in imports.’’
He added that taxes will |be known after items reach Sri Lanka.
To address import price issues and supply chain disruptions, he said they strategically localised his company's supply chain and opted to import raw materials instead of ready-made garments, with exceptions for products like salwars, sarees, items for infants, and others.