A government committee has determined after an inquiry that Prima Ceylon Ltd., the company which holds the monopoly in milling wheat flour, has violated its agreement by not providing adequate supplies, by failing to maintain required buffer stocks and issuing poor quality wheat flour.

The committee has therefore recommended the lifting of the 10% import duty imposed on milled flour until such time as the supply and quality of Prima flour returns to normal. There is no customs duty on the wheat grain imported by Prima although milled flour is subject to a 10% tariff.

The committee has suggested that the food commissioner monitors weekly and reports any lapses on Prima’s part to the finance ministry secretary so that terms and conditions of the agreement can be enforced.

The matter was taken up with Prima after it was found that current production levels only permit a ship-to-mouth existence. The situation has been aggravated by increasing consumption of wheat flour in the north.

According to the agreement with Prima Ceylon Ltd., it is mandatory to carry a continuous buffer stock of 12,000 metric tonnes of wheat flour at the mill; 28,000 metric tonnes at district stores; and 50,000 metric tonnes of wheat grain at the mill.

As at July 29, however, there were only 3,528 metric tonnes of wheat flour at the mill, almost nothing in district stores, and 49,145 metric tonnes of wheat grain at the mill, authoritative government sources said.

This has led to a large shortage of wheat flour in some parts of the country while high prices were being paid by the customer for what was often poor quality. Prima has maintained that better quality wheat flour could be provided, but the public may find it difficult to pay the price.

When asked about circumstances which led to stock depletion, the Prima management has explained to the government that the immediate cause had been delay in the shipment of a consignment of 60,000 metric tonnes of wheat grain from Australia.

Elaborating further on reasons for the low stock position, the Prima management has said that the company has to maintain small stock as stock-holding costs were very high. Large stocks will result in the cost being passed on to the customer.

Meanwhile, Prima has decided to double silo capacity (from 100,000 metric tonnes to 200,000 metric tonnes) in order to ensure the holding of a larger buffer stock of wheat. This will be completed in 18 months.

On the subject of flour quality, the committee has found that Prima imports wheat grain through Indian state trading organisations under a credit agreement with India. "The state agencies do not bother to clean the wheat before shipping...," the sources said. "There is a lot of wear and tear of the machinery when milling Indian wheat because of the mix of impurities such as sand etc., in the wheat."

"When private suppliers do the shipping, they clean the wheat," they added.

Although clause 6 of the Prima agreement stipulates the quality standards to be maintained in respect of wheat flour in relation to moisture, ash and protein content, the government committee has received complaints that the required quality of flour is not maintained. Subsequently, bakers are unable to produce good bread.

Prima management has maintained, however, that the wheat flour available in Sri Lanka was of good quality. They said, instead, that bakers may be blending Mill Brand with Prima Green. Sub-standard loaves could also be due to a larger proportion of Indian soft wheat being blended with hard wheat.

The government committee has requested the food commissioner to draw random samples of wheat flour from the market and obtain test reports from the Ceylon Institute of Science and Industrial Research and forward the same to the secretary of finance.

Distribution of flour is also not satisfactory. Seventy per cent is handled by private dealers and 30 per cent by co-operatives. Stock position at district level is not satisfactory because private dealers and co-operatives do not have sufficient financial resources to hold the stocks, the government officials said, adding that Prima collects immediate cash from stockists and retailers for all their transactions.