The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

AML Foods chairman yesterday reiterated calls for the Government to abolish price controls, arguing that high levels of competition in the food retail industry meant it no reason to “meddle”.

Dionisio D’Aguilar suggested that the Christie administration consolidate price control abolition as part of its fiscal reform programme, describing the regime as antiquated and not serving consumers in the way it is meant to.

“Price control is not doing what it’s intended to do,” he told Tribune Business. “The Government should not feel the need to control prices of basic items.

“There is so much competition in the food store marketplace that there is no need for the Government to step in and meddle with the prices.”

Price control restricts the margin or mark-up that food retailers, and wholesalers/suppliers, can levy on so-called ‘breadbasket items’, ostensibly to keep these affordable for poor people and to prevent price gouging.

Margins on price control items are normally restricted to around 18 per cent, which leaves retailers selling ‘breadbasket’ items at a loss.

It forces them to increase prices on non-regulated products, often the higher-end, healthy ones, which has the twin effects of pricing them out of reach of many consumers and subsidising the price controlled items.

And, as reported by Tribune Business, price control’s negative effects are set to be exacerbated by Value-Added Tax (VAT), given that breadbasket/price controlled items are proposed as ‘exempt’.

Given that these form the bulk of many retailers’ inventories, some stores may be unable to recover up to 80 per cent of their input tax payments, increasing costs, squeezing margins and pushing the prices of non-breadbasket items even higher.

“In the current environment, it’s very difficult for food stores to make money with price control,” Mr D’Aguilar told Tribune Business. “We’re having to jack up the prices on everything else to have all these loss leaders.

“It’s [price control] been in place since 1971. My God, let’s get rid of it now. It doesn’t work. All it’s doing is artificially lowering the price on certain goods, and everyone’s screaming about how expensive the prices are on other items, the healthy ones.”

Calling for the Government to 
“let the market figure it out”, Mr D’Aguilar said food store should be allowed to add 30 per cent mark-ups to rice bags if they so chose.

“One food operator tells me he doesn’t carry the basic any more,” the AML Foods chairman added. “It makes no sense. It’s ridiculous.

“There’s so much competition in the market. No one’s going to charge cost plus 100 per cent because no one will buy their rice, and if they are not buying rice they will not be buying your other items.”

Mr D’Aguilar said “pandering” by successive administrations over price control, seeking votes, had left the Government in a position where, politically, it had no choice but to keep the existing regime.

“They need to get themselves out of it,” he added, suggesting price control’s removal be combined with fiscal reform.