I went to get some milk today for my cereal. It was Rs. 155 for a liter of Ambewela (which I bought) and Rs. 165 for 250g of Rathi powdered milk. I mention this only because milk is the latest flash point in Sri Lanka’s ongoing consumer trauma. Just a few days ago, local farmers were so pissed at low profitability that they were pouring milk down the Hatton streets, even bathing in it. In response, the government has raised taxes on (imported) milk powder by 15%. The end result, however, is one more higher priced consumer good.
I sympathize with the local farmers, but supply and demand isn’t something the government can manufacture. Honestly, I don’t get the demand for powdered milk at all. I do wish milk would come in something beside paper cartons that make me spill everywhere, but I still buy Ambewela, which comes from Nuwara Eliya apparently. I should note that I only buy Ambewela because like two years ago they gave me a free glass with every two-pack. At this point I had no glasses and this seemed like a win. They stopped giving the glasses 1.5 years ago, and yet I still blindly buy Ambewela. So perhaps better marketing would help.
That said, apparently prices have gotten so divergent that many distributors are simply not buying local milk anymore, with the exception of big chains like Cargills. Hence the farmers are protesting.
The traditional government response, however, is bad economics, which ultimately hits the consumer. It’s protectionism, trying to limit imports, but for a country like ours (any country really) it really doesn’t work. It’s like pushing air around a limp balloon. The pressure will just pop up somewhere else. In this case, the government is effectively subsidizing dairy farms at the expense of all consumers (who buy milk). I mean, I buy milk like once a month, but people with families buy it every week.
There’s a subcontinental fetish with milk products – especially for children – as you can see from advertising. Horlicks, Milo, Nestomalt – all are considered an essential extension of mother’s love. Plus milk tea is often more milk than tea. Hence, these are items that people buy constantly and if they are buying milk powder it’s probably out of economic necessity. Now, however, milk powder is up by Rs. 92 a kilo, so presumably without taxes it would be much cheaper than it is. This is another essential good like tinned fish, which is also imported and taxed heavily.
So, do I think it’s good policy to subsidize Sri Lankan dairy farmers? No, not really, because it comes at the expense of Sri Lankan consumers and creates another inefficient subsidy. It is, however, almost necessary politics.
In other news, my cereal had ants in it. I would eat them out of hostility, but they taste bad.