{"id":240526,"date":"2025-01-13T13:35:04","date_gmt":"2025-01-13T08:05:04","guid":{"rendered":"https:\/\/www.colombotelegraph.com\/?p=240526"},"modified":"2025-01-23T01:47:14","modified_gmt":"2025-01-22T20:17:14","slug":"with-akd-npp-government-no-rice-crisis-occurs-in-the-future","status":"publish","type":"post","link":"https:\/\/www.colombotelegraph.com\/index.php\/with-akd-npp-government-no-rice-crisis-occurs-in-the-future\/","title":{"rendered":"With AKD\/NPP Government No Rice Crisis Occurs In The Future"},"content":{"rendered":"

By\u00a0Asoka S. Seneviratne<\/a>\u00a0\u2013<\/strong><\/span><\/p>\n

\"\"

Prof. Asoka.S. Seneviratne<\/p><\/div>\n

“Vision without a strategy remains an illusion<\/em>” ~ Lee Bolman<\/p>\n

Recently, there was a shortage of rice at the controlled price. In short, the AKD\/NPP government did not create this situation. The past governments, basically the previous government, were responsible for the unexpected situation because they did not work with insight and strategically to avoid a possible rice shortage in the market. However, the bankrupt opposition used the rice shortage to brutally attack the government, as it ended the AKD\/NPP regime. Fortunately, people know well about the culprits. As the government understood the nature and extent of the situation, it acted wisely to address and resolve the rice shortage. Now that the rice crisis is over, the opposition is quiet on the rice shortage. However, the rice shortage has allowed the government to work with insight and strategically not to have such a crisis in the future unless it is beyond its control, such as the severe impact of climate change and a global food crisis. Given the above, this paper aims to indicate the essential policy initiatives the AKD\/NPP government must focus on to ensure no future rice crisis occurs.<\/p>\n

Establishment of the Paddy Marketing Board (PMB)<\/span><\/strong><\/p>\n

At the beginning of the 1970s, there was a global food crisis for many reasons, affecting Sri Lanka too. Indeed, about 50 years ago, people who faced the food crisis and are still living know the nature and extent of the rice or food crisis, as there were severe restrictions for raw rice transportation (i.e. except 2 kgs of rice per person), supply of rice by caters (i.e. only 3 days per week), severe penalties for rice hoarders, and five universities were closed, among many difficulties faced by the people. The government launched \u201cWagaa Sangramaya\u201d (War of Cultivation) <\/b>as the last resort.\u00a0 <\/span>Given the above, the recent rice crisis is nothing. The crisis paved the way for establishing the Paddy Marketing Board (PMB)\u00a0 <\/span>in 1972 (Act No 14 of 1971),\u00a0 <\/span>which was a wise decision, the turning point for food security in many ways based on the Vision, Mission, aim, and objectives of PMB as given below. The VISION<\/span> is to be the leading national institution in purchasing and handling agro-based products, and the MISSION<\/span> is to implement a trading mechanism towards the satisfaction of agro-producers and consumers. Given the above, aims and objectives of the Paddy Marketing Board: <\/b><\/p>\n

1. Purchase, sell, and supply grain products and maintain distribution activities.<\/p>\n

2. Motivation to keep up the quality of grain products.<\/p>\n

3. Preparing and distributing grain products for consumption.<\/p>\n

4. Maintaining a buffer stock for food security.<\/p>\n

5. Making arrangements to provide quality grain products to consumers at reasonable prices.<\/p>\n

6. Enhancement of livelihood of farmers by providing assured prices for grain products<\/p>\n

Given the above, PMB focused on paddy production and included the whole grain sector in the economy.<\/p>\n

Initially, the assured\/guaranteed price per kg of paddy was Rs. 0.72, and PMB purchased about 25 percent of the paddy production as required\/managed through its countrywide network.<\/p>\n

Until trade liberalization in 1977, PMB worked with its Vision and Mission and was successful in business. Following trade liberalization, the private sector gradually established its dominance in the paddy and rice markets. However, PMB did business by looking after producers and consumers, sometimes facing financial losses amid the government\u2019s privatization policy. Accordingly, restructuring the PMB was started at the end of the 1980s. As a result of this process, PMB was closed at the beginning of the 1990s, affecting 3,200 employees; 375 paddy mills and warehouses were declared run-down, and some were auctioned while a few were given to other institutions on lease.<\/p>\n

It is worth noting that a proposal to dissolve the PMB was submitted to the parliament. However, most parliamentarians opposed this move, and the PMB remained inactive.<\/p>\n

In 2008, PMB was re-established. Since then, PMB worked along with its aims and objectives. However, during the Yahapalanaya or Good Governance regime (2015-2019), PMB was weakened as the government favored and supported the private sector in many ways. It is essential to mention that in 1977 and 2016, the same elite politicians that weakened PMB in many ways (e.g, Paddy cost was Rs 45.00 but was sold to political cronies at Rs 24.00 in 2016) made considerable noises in the parliament about the recent rice shortage in the country. Furthermore, the same elite politicians headed by Ranil Wickremesinghe (RW) distributed rice stocks of the PMB free without focusing on the needs of consumers, contributing immensely to the recent rice crisis. This was aimed at winning the presidential election, but RW lost the presidential election.<\/p>\n

Demand for rice and Paddy Production<\/span><\/strong><\/p>\n

In simple economics, rice shortages arise from mismatching demand and supply. Indeed, hoarding or rice Mafias is a matter. I will come to this point later. According to the Department of Census and Statistics (DCS), per capita rice consumption per annum is 110 Kg. Given the above, the total annual demand (only for human consumption) is 2.4 million MTs of rice. It is estimated that 4.1 million MTs of paddy (or 1 kg of rice needs 1.5 kgs of paddy) is required annually to produce 2.4 million MTs of rice. Given the above, the focal point is whether Sri Lanka could produce a minimum of 4.1 million MTs paddy annually to meet the demand for rice 2.4 million MTs. In short, it is possible.<\/p>\n

\"\"

Table 1. Paddy production from 2013 to 2023. Source: DCS<\/p><\/div>\n

According to the above table 1, Sri Lanka has produced the required quantity of paddy, 4.1 million MTs since 2019, with only a small shortage in 2022.\u00a0 <\/span>The estimated paddy production for 2023 and 2024 is 4.5 million MTs and 4.6 million MTs respectively. Given the above, if PMB managed to keep the necessary paddy\/rice in stock, there would be no reason for the recent rice shortage in the market. However, it is convenient to conclude that an oligopoly (a smaller number of companies controlling the supply of a product or service)\u00a0 <\/span>exists in paddy and rice markets causing the shortage, the naked truth.<\/p>\n

It is a politico-oligopoly, because it is not a matter of which political party or government is in power; a few companies are dominant or can do business as usual. It is well known to President Anura Kumara Dissanayake\u00a0 <\/span>(AKD) that Sri Lanka produces the required quantity of paddy and, hence, the required quantity of rice. Given the above, President had a few meetings with all the stakeholders, explained facts and figures, and advised accordingly, concluding that a single grain of rice would not be imported. The above does not mean importing some varieties of rice like Basmarthi for the tourism industry, etc. The crucial point is that if PMB can perform along with its aims and objectives, future rice crisis will not occur, irrespective of the abovementioned Oligopoly.\u00a0 <\/span>In other words, if the government could act insightfully and strategically, Oligopoly cannot cause rice crisis. <\/b><\/p>\n

Regarding the above, among many, PMB should maintain buffer stocks.<\/p>\n

This is about maintaining paddy\/rice stock until the next harvest, assuming no calamity would occur. Sri Lanka has two seasons, “Yala” and “Maha\u201d,\u00a0 <\/span>and usually “Maha” yields higher production due to rain-fed agriculture practices around the country (from Oct .to Jan\/Feb). If one season is damaged due to calamity, the buffer stock should be half-year’s requirement for annual consumption (about 2.1 million MTs of paddy (and 1.2 million MTs of rice). However, stocking that quantum as a buffer will not be cost-effective due to excessive storage costs. Given the above, a buffer stock is to be maintained at a maximum of two months’ human consumption requirement. That comes to about 0.6 million MTs of paddy (0.4 million MTs of rice). In case of any calamity, the government should be able to find foreign supplies within two months or soon. In short, maintaining buffer stocks is a considerable challenge (i.e., risk assessment, planning, etc.) in many ways to avoid future rice crisis.<\/p>\n

Ensuring no rice crisis is in the future<\/span><\/strong><\/p>\n

The foundation of the above is that the government has well understood the nature and extent of the behaviors and response of the paddy and rice markets, its profound commitment to safeguarding the producers and consumers, and, particularly in the absence of corruption, fraud, and any form of mismanagement that harm the aims and objectives of PMB at the center. Given the above, to avoid a rice crisis in the future, the NPP government must have short-term, medium, and long-term plans starting with the ongoing “Maha Season,” which will be harvested by early Feb and March. Also, through the above mentioned planning, room to blame for the oligopoly cannot be existed in the future.<\/p>\n

Short-term Plan\u00a0of NPP Government <\/b><\/span><\/p>\n

Step 01<\/b>: Get all the existing paddy storage facilities cleared (PMB and Co-operatives in Agriculture areas own them). Some work is in progress in this regard. However, completing this work around the country to store purchases of Maha Season should be ensured.<\/p>\n

Step 02<\/b>: Release required funds as short-term loans from People’s Bank to PMB to purchase paddy from farmers<\/p>\n

Step 03<\/b>: PMB should get into contracts with small private millers so that PMB supplies paddy to millers at a standard price, and millers should mill and give rice to PMB.(e.g., if PMB gives 15000 kg paddy to a miller, in return, miller should give 10000 kg of rice). Millers seem to keep about Rs. 35-40\/= per kilo from raw rice to cover overheads such as electricity, transportation, labor, + PROFIT. The majority of this amount probably ends up as profit. It should be noted that when a miller produces millions of kilos of rice, the overheads are much lower.<\/p>\n

Step 04<\/b>: Sathosa & Co-operatives should prioritize purchasing rice from PMB.\u00a0Any profit earned should be socially justifiable.<\/p>\n

Medium-term Plan of NPP Government<\/b><\/span><\/b><\/span><\/p>\n

Step 01<\/b>: PMB should develop new paddy storage facilities with the latest technology. Abundant land exists, and large storage complexes near railway facilities in Murunkan, Kilinochchi, Medawachchiya, Thambuttegama, Kekirawa, Hingurakgoda, Eravur, Beliatta, Puttlam, etc. (that makes transport easy) are proposed. Labor can be obtained from tri-forces with the skills to develop these large storages if the necessary raw material is provided.<\/p>\n

Step 02<\/b>:\u00a0Paddy farmers who intend to get a “fertilizer subsidy” should register under PMB. Farmers will be paid a subsidy as per the quantity of paddy hey supply to PMB (Total Quantity Supplied to PMB x Subsidy per Paddy kg).<\/p>\n

Step 03:\u00a0<\/b>PMB should get into contracts with private millers in a way that PMB supplies paddy to millers at a standard price, and millers should mill and give rice to PMB (e.g., if PMB gives 15000 kg paddy to a miller, in return, miller should give 10000 kg of rice). The government must decide on a ceiling on rice prices by allowing reasonable profit to all (i.e., farmers, millers, wholesalers, and retailers). Consumers will also be happy.\u00a0Any profit earned should be socially justifiable.<\/p>\n

PMB should be managed as a commercial entity with fair margins without mismanagement and corruption. Hire professionals, pay them good salaries, and get things done.\u00a0Finally, as the PMB comes under the radar of COPE, any form of illegal activity should not come to the notice of COPE.\u00a0<\/b><\/p>\n

If the government can manage short\u2014and medium-term plans, it will lay the foundation for the long term, based on the PMB’s aims and objectives.\u00a0However, in the long term, the government needs to focus on two other areas that are related to rice crisis<\/b>. One area is reducing the heavy dependency on rice consumption, which has substantial benefits in many ways. In short, it is to change food consumption habits. <\/b><\/p>\n

Great Need to Change Food Consumption Habits<\/span><\/strong><\/p>\n

So far, I have explained the proper measures to be taken to avoid future rice crises. Along with the above, the following is also vitally important. T<\/strong>here is a great need to change heavy dependence on rice consumption for carbohydrates or crabs (i.e., fewer carbs are good in many ways). <\/b>In Sri Lanka, the cost of proteins (meat, eggs, and fish) and vitamins (fruits and vegetables) are relatively expensive compared to Carbs (rice and bread). This problem is severe when it comes to urban households who have no land to cultivate something. So, many people cannot afford a high protein + vitamin diet due to income constraints. So, for hunger, they eat rice and bread as much as possible due to lower costs and may fall sick in the long run. The above means there is a need to change dietary habits by lowering the price of non-carbs foods.\u00a0 <\/span>To reduce the cost of non-carbs foods,\u00a0<\/span>Sri Lanka needs to produce more meat (beef, pork, and chicken), eggs, and fish. (i.e. supply increasing strategies for livestock and fisheries). So, to go on a “low-carbs diet,” social awareness, income enhancement, and reducing the cost of protein and vitamins should be implemented. This will yield long-term results by lowering non-communicable diseases (NCDs, like diabetes and other obesity-related diseases), and future generations’ mental capacity will be higher through better nutrition. Another thing is to change the attitudes toward dietary habits, such as eating three times or eating more heavy meals\u2014all the above need to be planned and implemented on a short\u2014to medium-term and long-term basis. As a result, the heavy dependence on rice consumption could be reduced. This will help future rice crises.<\/p>\n

Release and use of land for minor agricultural products<\/span><\/strong><\/p>\n

Another area related to rice crisis is the release of land from paddy cultivation.<\/p>\n

\"\"

Table 2 – Possibility for an increase in land for minor crops along with a 15% land release. Source: DCS 2022<\/p><\/div>\n

It is estimated that about\u00a0708,000 ha (1,750,000 acres)\u00a0of land uses for paddy cultivation. Paddy cultivation contributes 1 percent to GDP. However, paddy-related activities (e.g., milling, transportation, storage, and whole and retail trade) contribute about 2.5 percent to GDP.\u00a0 <\/span>In other words, 5 million MTs paddy contributes 2-2.5 percent to GDP.<\/p>\n

Paddy is highly dependent on all land, water, and other inputs. Accordingly,\u00a0 <\/span>the government’s costs are increasing and becoming too high (e.g, as per MoF, the agriculture-related subsidies in 2022 and 2023 were around Rs. 55 billion per annum).\u00a0 <\/span>So, how far the government can go ahead is an issue. There is a great need to change the above without compromising the farmers’ income or the rural sector development. <\/b>NPP government must undertake land utilization surveys in the country, which will be in the right direction or beneficial in many ways. Then, it will realize how much arable land is left abundant and how much is under-utilized. For paddy, along with better coordination, the country could produce about 25% more than the required for human consumption. Suppose it could leave another 10% for animal feed paddy and beer production. In that case, the country still releases 15% of land from paddy, which comes to about 180,000 hectares (450,000 acres or 1,800 sqm or 2.75% of Sri Lanka’s geographical territory). Given the size of Sri Lanka, a massive amount of land has alternative uses.<\/p>\n

As per the below data, if 15% of the land could be released from paddy, the country could more than double the production of maize, ground nuts, green gram, Sesame, and Black gram (the above is helpful to change dietary habits and increase nutrition) and dried chilies, etc. Suppose we can improve paddy yield further through high-yielding seeds, better technology, and minimizing crop damage. In that case, even more land could be released from paddy for other crop production or economic activities. Moreover, it will save water and fuel, as paddy is a highly energy-consuming crop.<\/p>\n

Compared to rice, the 12 minor crops mentioned above often in short supply and hence price increases are unavoidable. Without compromising the required paddy production (i.e. 4.1 million MTs annually), production of 12 minor crops can be increased generating substantial benefits to the farmers, consumers, particularly reducing rice consumption and encouraging other grain consumption\u00a0 <\/span>that helps good health. The livestock feed industry could also be fostered. The above all could help to avoid future rice crisis.<\/p>\n

Conclusion<\/strong><\/span><\/p>\n

The recent rice crisis paved the way for a barrage of criticisms by the bankrupt opposition. However, they forgot that they created it due to wrong decisions taken in the past to favor and support their cronies. It is well known to the President that Sri Lanka produces the required quantity of paddy and rice to meet the demand. However, the AKD\/NPP government addressed and solved the rice shortage as it knew the nature and extent of the problem (i.e. Oligopoly). By learning from the rice crisis, the government needs to be insightful and strategic to prevent a rice crisis in the future. Regarding the above, this paper highlights necessary policy measures to be implemented based on the short to medium and long term. The crucial point is that if PMB can work along with its aims and objectives, the future rice crisis will not occur, irrespective of the so-called Oligopoly in the market.\u00a0 \u00a0<\/span><\/p>\n

*Among many, the writer worked as the Special Advisor to the Office of the President of Namibia and was a Senior Consultant with UNDP for 20 years. He worked as a Senior Economist with the Central Bank of Sri Lanka (1972-1993) before he migrated to New Zealand. The writer can contact\u00a0via\u00a0<\/i><\/b><\/span>asoka.seneviratne@gmail.com<\/i><\/b><\/span><\/i><\/b><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

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