Monday, August 15, 2011

Attaining self-sufficiency in rice: The problem of marketing

The country has achieved self-sufficiency in rice. This has been one of the significant post independent achievements of the Sri Lankan economy: As much an economic goal as a political ambition. It took the country nearly six decades after achieving independence to attain self-sufficiency in her staple food. The country had more or less achieved self-sufficiency several years ago. (See Table).


Between 2005 and 2010 in every year except one (2007) has been years of self sufficiency, as the statistics of the Department of Census and Statistics demonstrate. However in these years, as would be this year, there would be a certain amount of quality rice imports such as Basmati rice. On the other hand, the country has exported a quantity of particular varieties of rice to cater to the demand for varieties of rice produced here and demanded mainly by Sri Lankans abroad.


During the current Yala harvest, paddy production is expected to reach 1.7 million metric tons. This is about 0.5 million metric tons more than what was produced in Yala last year, The country is likely to face excess paddy production due to the added contribution from the North and East. This year, and in most years afterwards, the country is likely to have a surplus of rice: production in excess of domestic rice consumption needs. How one copes with the surplus is in itself an issue.


Increased production and marketing

Cabinet spokesman, Media and Information Minister Keheliya Rambukwella announced recently that Sri Lanka has attained self-sufficiency in rice due to the cultivation of new paddy lands mainly in the North-East as a direct result of the dawn of peace, In fact the cultivation of lands in the North and East has enabled a further increase in paddy production. Despite the floods ruining the paddy crop in the East and North in Maha, it appears that the expected Yala harvest would more than compensate for that decrease. The reason to avert to the issue of self-sufficiency in rice this time around is the immediate problems that the country’s paddy farmers face when paddy harvests are good.



The current Yala crop is likely to be bountiful and consequently farm gate prices are likely to fall. Consequently Minister Keheliya Rambukwella announced that cabinet approval has been granted to establish a special fund amounting to Rs. 5.5 billion for the milling and storage of paddy harvested during the rest of the year by the Paddy Marketing Board (PMB) at the weekly cabinet news briefing on August 4. This is a revolving fund that is expected to recoup the money spent on purchasing paddy by its sales. 

The objective of the intervention is to stabilize prices that farmers get for their paddy at a remunerative level by purchasing of paddy with immediate effect in all districts where the Yala crop is being harvested.



Problems of marketing

The marketing of agricultural produce has been a recurrent problem. At harvest time farmers are unable to sell their produce at remunerative prices that cover their costs of production. In a context where the costs of agricultural inputs are rising and wages are increasing owing to inflation, it is vital for farmers to obtain good prices for their produce. Even though prices of agricultural commodities are high at consumer levels, producer prices are low. The reduction of marketing margins could contribute much to both reducing consumer prices of agricultural commodities and farmers receiving better prices. These have to be resolved by developing storage and milling capacity, promoting competition and improving transport facilities. There should be more constructive private sector-public sector collaboration.



A perennial problem that farmers have faced is that they are unable to get a reasonable price for their crop at harvest time. This is partly due to successive governments’ efforts to intervene in the market to give an appropriate price has failed for several reasons. Foremost among these reasons is that the government agencies handling the implementation of a guaranteed price for paddy have been corrupt and often worked hand in glove with middle men and powerful vested interests to sabotage the government’s purchasing paddy at a guaranteed price. This has happened from the time the Guaranteed Price Scheme (GPS) was introduced in 1958. The Agrarian Services Department that implemented the programme for many years failed to ensure that a large proportion of farmers received the guaranteed price, though the scheme perhaps succeeded in stabilizing the paddy price to a limited extent.
Later the government established the Paddy Marketing Board (PMB), which too failed to provide a solution to this problem. Ultimately the cost of running this institution was so much, while the results of the intervention were so limited that the government decided to scrap it. The PMB purchased about 10 to 15 per cent of the total production keeping the price somewhat stable though many farmers were unable to obtain the guaranteed price. There are claims that the PMB enabled farmers to sell his paddy at any time preventing the traders’ manipulation of the price to their benefit. However studies have shown that its usefulness was too limited. It was scrapped in 1996. The PMB was resuscitated by this government in the hope that it would intervene more effectively to ensure farmers get a remunerative price. The present government’s efforts to purchase a high proportion of the crop at the guaranteed price have also so far not succeeded. Whether the current effort would meet with success is left to be seen.


The corruption of the agencies implementing the programme is one of the core problems. There are difficulties in eliminating this as these officers have political patronage, are connected with powerful politicians and work in collision with middle men who depress prices. One of the ways by which the objectives of the government are sabotaged is by officers saying that the paddy brought by the farmers are not up to the accepted standards, such as the amount of boll vee being more than the permitted level. Another ruse is that the offices say they do not have funds that day. In either case, the farmer is unable to take his produce back to the farm and bring it again. They are therefore compelled to sell it to merchants who hover around.


Conditions for effective marketing

The success of the current effort to ensure farmers get the guaranteed price depends on a number of conditions. A most fundamental factor is to ensure that corruption is at a minimum and that farmers who bring their produce are able to sell their produce. For this each purchasing centre must have adequate funds and if there is a shortage of funds at any time and place they should give a PMB cheque to cover the costs of the purchase. When a farmer’s crop is rejected he should have a means of appeal and complaints lodged. Officials from other government agencies should play a part in this. Adequate storage facilities are also needed. The increase in government expenditure in developing storage facilities is an important step in the correct direction.

Farmer organisations should play a role in the marketing of paddy. If they are well organised they could sell their produce at wholesale marketing points like at Dambulla at the going prices. Farmer organizations should also play a role in milling and storage of paddy and rice. It is by these means that farmers can obtain a good price for their produce and reduce the marketing margins between producer and consumer.

Surplus production of paddy should not result in depressed prices for farmers. If paddy prices fall then this would be a serious disincentive to paddy producers. The government’s efforts to purchase paddy at remunerative prices must be backed up by an efficient and incorrupt implementation.



http://www.nation.lk/2011/08/14/newsfe10.htm


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