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Serving Sri Lanka

This web log is a news and views blog. The primary aim is to provide an avenue for the expression and collection of ideas on sustainable, fair, and just, grassroot level development. Some of the topics that the blog will specifically address are: poverty reduction, rural development, educational issues, social empowerment, post-Tsunami relief and reconstruction, livelihood development, environmental conservation and bio-diversity. 

Tuesday, March 21, 2006

Crisis in the paddy harvest

Daily Mirror: 09/03/2006" By Upali Cooray

It is understood that a new authority to buy paddy has been established under the ministry of trade. This organization will never be able to break away from the shackles of the political authorities. One wonders whether it will also end up with the same fate that befell the P.M.B.?

The chances are very high. With nearly 1.9 million m/tons of rice expected this year and a self sufficiency ratio of over 93 %, a planned system of marketing is sadly lacking, just like in the past years. Every thing that has been done is an exercise of dousing fires. One has not seen at least a list of buying centers of this organization in the media, which is a preliminary requirement. It is also understood that farmer identity cards would be required to sell paddy to the buying centers operated buy the government. A farmer would be allocated a quantity of paddy he could sell to a purchasing center, depending on the acreage he has cultivated. Unfortunately the ground level realities show that all these controls brought in to ensure genuine farmers from selling their paddy at the guaranteed price will not work smoothly.

Marketing
The government with all its resources would purchase around 10% of the marketable surplus of paddy. The balance is purchased by the private sector millers and other stockists. Most farmers do not bother to sell their crop to the state or to the co-ops because they have either kept their harvest as collateral to a middleman through indebtedness or it is convenient for them to sell the stock at the threshing floor itself rather than bothering to find transport and take the stock to the government paddy centers many miles away. So, the buying agents in the private sector purchase the stock at much reduced price from the farm gate. The farmer identity cards are touted for a price by the collectors who travel to remote areas and bring the paddy to the centers. For that matter many so called “middle men” as indicated in the letter of Mr. D also hold farmer identity cards with them.

The system of purchasing of paddy by the co-operative societies is also rampant with irregularities and weaknesses. This is not an ideal method of purchasing paddy. The biggest weakness in this system according to my experience is that one cannot ensure that the farmer would get the price guaranteed by the government. Though the records might show that the farmer got the guaranteed price, the possibility of part of the price to the farmer being siphoned off is great. The co-ops are expected to get the paddy milled and transfer the rice such milled to food dept. for sale.

All indications are that towards Sinhala New Year the paddy crisis will be out of control whilst the government at best would do a stabilizing exercise of prices in scattered areas where the paddy buying centres are located. The state was never able to procure more than 10% of the total harvest even when the P.M.B was in operation. The letter written by Mr Dissanayake to the President states that paddy prices have come down to Rs10 and 9.50 per K.G in the Trincomalee district.

This is a vital factor to note. An important factor among many other reasons for this situation is the quality of paddy harvested. The quality of paddy grown in certain marginal areas is not of satisfactory quality. One rarely hears a problem in selling paddy in Hambantota district or Mahaweli H and C areas. Similarly the paddy from Ampara Muslim areas fetches good prices on account of quality. It is a practice in the Hambantota and Ampara districts for the farmer to thresh paddy on a thick canvass or thick carpet of Jute Hessian (Padangu) to ensure extraneous matter from getting mixed with the threshed paddy. Why this simple practice cannot be spread to other areas?

It adds value to the crop and enhances the quality. No one except the state would pay the minimum guaranteed price for a quality of paddy which does not produce good marketable rice when converted. Cleaning sorting and grading of paddy are done only at the commercial level after moving the stock to urban areas. This is a loss of income to the farmer due to low quality offered.

Subsidy, yield
Agricultural scientists are of the belief that subsidizing fertilizer is not at all the answer to increasing national rice production. The subsidy on fertilizer will have very little impact on national rice production. It is hard to believe how the economists in the treasury too have joined the band wagon to proclaim that the fertilizer subsidy is an investment!! Rice scientists express concern that encouraging usage of Urea would lead to a nutrient imbalance causing adverse effects. Scientists in this country claim that fertilizer subsidy of over Rs. 5 billion if used in demonstrating the technology packages developed by them would increase the traditional average yield of 70-80 bushels to 120 bushels/acre. The fertilizer use in rice has doubled in the last decade but average rice yields increased only about 8%.

Post harvest handling, storage and processing of agricultural products have been a relatively neglected area in agricultural production in Sri Lanka. It is estimated that 20%-45% of the food crop is lost due to poor pre-harvest and post - harvest practices.

Assuming that correct course of action was taken to increase the paddy harvest so that this country has achieved full self sufficiency; the exercise in increasing yield should go hand in hand with lowering cost of production. Inculcating productivity consciousness and entrepreneurship is more important than just getting the farmer to increase yield.

Exporting rice
Though Sri Lanka is higher to other Asian nations in respect of yield per hectare, the cost of production is one of the highest in Asia. So there is no possibility of Sri Lanka exporting any excess rice at these cost levels. A government subsidy on export would be a better investment than the so called ‘investment’ of giving Urea at Rs.350/- The policy makers from time to time proclaim that rice will be exported. To sight an example the agriculture minister in the U.N.F government in 2002 said in Parliament that 20,000 tons of rice would be “exported to Indonesia in a week”. The export was on paper only. The truth is that Sri Lanka cannot compete with export giants in Asia such as India, Thailand, Vietnam, and Pakistan unless the cost of production is brought down and exportable quality rice is produced. We are a long way from this.

The government and specially the three authorities concerned, the Treasury, Ministry of Agriculture, and Ministry of Ttrade would do well if more attention is given to exporting rice than giving Urea cheap. There are many possibilities for Sri Lanka to become competitive in rice exports. Our country produces only 0.4% of the world’s production of rice. Therefore, attempting to export commonly sought after rice varieties to the international market will be a futile exercise. Selling specialty rice to the world market is a better option.

At least one private company has commenced such an operation in Sri Lanka. This should be encouraged. Cultivating organic rice is one such option. The red rice and samba rice grown in Sri Lanka has no equal in the world market. The super markets in the west carry rice similar to local red rice. This rice is called Wild rice. These products are sold at high prices in those countries. These are potential niche markets which have to be explored. The attention of professional marketers and the export development board should be drawn to create markets for these unique rice varieties.

The Uva provincial Council a few years back had a project to sell organic rice locally. This project done in collaboration with private sector was a success. The rice packed in attractive 5 K.G packs was a draw at the CWE super markets at that time. The Colombo consumers were prepared to pay a premium for this rice. I am not sure what went wrong, but the project has been abandoned.

Sri Lanka rice should have a unique selling proposition in the local and international markets. This can only be done if the exercise begins with the farmer.

Paddy milling industry in this country is far behind in technology to process good rice. It is said that uncertain government policy making at different time such as permitting of importation of rice has led to Millers going out of business or not improving their mills. Paddy cultivation and marketing in this country has become the domain of vote hunting short sighted politicians and not the specialist in the field. What is now required is not a division of strategies into short term and long term. The so called short term strategies have been repeated in the long term to douse fires. Long term strategies should be given priority than short term. It is vice-versa now.

The paddy farmer of this country should be made to understand that he has to produce a marketable product and should not just expect the market to accept what he grows. The market includes the international market also. The government’s role is not to create wasteful systems and procedures. With this in view an appropriate technological package plus risk management avenues should be opened.

An organization devoid of any governmental control, but with government backing probably funded by the stake holders in the rice industry should be formed to provide solutions to post and pre harvest risks faced by the stake holders. Some have called this as “Paddy Banks” but these organizations should cover a wider spectrum in the industry. There has to be Commodity Multi Link Points(MLP) where the designing and implementing of risk management solutions are carried out. The risks which should be managed by the MLP are, post harvest risk to the growers, pre and post harvest risk management for traders and millers pre and post harvest risk management for government agencies and Bank (lenders), pre-export risk management to exporters and a host of other risks. This field left alone to specialists but should be facilitated by the government. If proof is necessary we can turn to India where this field of activity in commodity risk management is fast gaining ground.

Paddy cultivation and marketing should be the domain of specialists .The politicians have encroached it. This encroachment is creating disastrous results harmful to Sri Lanka as a country. The best politicians could do is to keep their hands off .

The writer is a former General Manager of the CWE.


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