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Controlling prices of formula milk may cause more problems

The Price Control Act has been used only twice in Singapore's history.

The first time was in 1973, when licences were introduced for the import and export of rice, following a wave of panic-buying when the international oil crisis caused prices to soar.

The second was in 1990, after a few suppliers cornered the pork market and manipulated prices.

The Act was not invoked even when inflation hit more than 6 per cent in 2008.

It seems that for the Act to be invoked, there must be an element of crisis and a staple item consumed by the majority.

Formula milk powder, unfortunately, does not fall into these categories (Place formula milk under Price Control Act, by Dr Daniel Ng Peng Keat; May 17).

The Act is meant to curb profiteering, but the Competition Commission of Singapore found no evidence of illegal price-fixing among formula milk producers (Aggressive marketing of 'premium' formulas driving rise in baby milk powder prices in Singapore; ST Online, May 10).

Singapore has to ensure that the milk powder market remains open and competitive, and that information is readily available for consumers to make informed decisions.

If used liberally, price control can have a negative impact on the market.

When suppliers cannot set their own prices, they will be discouraged from producing more of the item, causing the supply to decline.

The quality of the products may also drop, as producers have fewer financial resources to reinvest in their business.

The result is less choice for consumers.

The correct approach, therefore, is for the Government to diversify its sources and offer cheaper versions of formula milk.

Francis Cheng

A version of this article appeared in the print edition of The Sunday Times on May 21, 2017, with the headline 'Controlling prices of formula milk may cause more problems'. Print Edition | Subscribe