Paddy problems at festive times

Paddy has been at the centre of our national life. Historically, paddy was the crop around which our economic life revolved. It was the inspiration for much of our cultural life as well. Yet during this national new year season several problems faced by the paddy farmer took centre-stage. The demonstration of farmers for a better price, purchase of their paddy crop at a guaranteed price, the banning of rice imports, the defeat of the government in parliament over the bill for the closure of the Paddy Marketing Board, all figured on the eve of the New Year.

What it all pointed out was that we don't have a coherent policy to ensure a smooth functioning of the paddy economy. We have not been able to resolve the fundamental problems relating to the production and marketing of our staple crop.

It is not our intention to either simplify the complexity of the problem, nor belittle the efforts of successive governments to promote paddy production.What remains clear however is that we have been at a loss to tackle the problems relating to paddy production at the technological, cultural, production or marketing levels. No doubt one of the key underlying reasons for this is that for some time, agriculture has been put on the back burner on the mistaken view that industry alone offers us the path to rapid economic growth.

Consequently our agricultural growth has been at the rate of one half of our overall economic growth rate. Even more telling is the fact that paddy production has been virtually stagnant over the last one and a half decades. Annual production of paddy has fluctuated around 2.7 million metric tons and average yields virtually stagnant around three and a half metric tons per hectare. The variations in yields have been mostly due to weather conditions, especially rainfall. The extent cultivated expands or contracts owing to rainfall conditions and paddy production fluctuates accordingly. Fortunately we have had good weather in the last few years and paddy production has been reasonably good. And now the marketing problem has surfaced. The paddy farmer is unable to sell his crop at an adequately remunerative price.

Weak marketing of agricultural produce has been one of the intractable problems of the economy. Scant attention has been paid to this aspect of agricultural policy for quite a long time. The belief that increased production is the paramount need has in fact led to a number of market failures affecting the production of several food crops. Paddy's entrenched position in the life of our farmers has prevented such a catastrophe. Yet poor marketing has been one of the factors for making paddy production rather unattractive, even non- viable as a full time occupation.

This should not be taken to imply that inefficient and corrupt government agencies should be kept going. They neither serve the interests of the farmer nor of the consumer. In fact they impose costs on the general public as their operations have to be subsidised. The way out of this impasse might be to strengthen farmer organisations. Unfortunately this approach too has not had much success in the past. The divisive nature of our rural society has prevented the development of robust farmer organisations. What neither the government nor the farmers themselves could do, the middlemen does with profit unto himself. It is no easy task to break this stranglehold in a context when the alternatives are not effective.

In fact the problem with respect to paddy marketing is not only due to poor marketing. An analysis of the market margins between the farm gate price and the consumer price would be the best indicator of this. No doubt the middlemen squeeze a larger profit than they should for a non-perishable crop with little or no risk of sale. Yet they too have costs and these could be rising. The recently increased fuel price increase is illustrative of this.What we are pointing to is that the problem of the paddy farmer lies much deeper and is more complex than the issue of a fair price.It may be that he is not getting an adequate return for his labour owing to low productivity, unsatisfactory extension services, higher costs of inputs and in the case of those who use hired labour, higher labour costs.

The bottom line of our comment is that if we are to get to grips with the problems of the paddy farmer, those responsible for research and policy on agriculture must study the question in depth and recommend a course of action. The understanding of the problem must be on actual field conditions, not on theory or past experience. It is only then that we can take some meaningful measures to solve the problems of the paddy farmer, which is not confined to the sale of his produce this season. Banning rice imports, which are in any case small, or offering a guaranteed price at which in fact little may be bought, are not likely to solve the fundamental problems of the paddy farmer.

Cost of war: Two years of GDP says IPS

By Feizal Samath

A top think-tank says the long-running separatist campaign by the LTTE and counter-insurgency operations by the government have cost the country the equivalent of two years of its annual gross domestic product at 1996 rates.

"... it is reasonable to conclude that, under even the most conservative assumptions, the country has incurred a war cost amounting to two years of annual GDP (at 1996 rates)," the Institute of Policy Studies (IPS) said in a new report finalised last week.

The semi-government agency warned that the longer the conflict, "the further the cost will increase, with the burden falling most heavily on the poor and the young of this country.

"The report titled "The Economic cost of the war in Sri Lanka" is the most comprehensive economic assessment of the ethnic conflict so far, and prepared by three IPS researchers including Dr. Saman Kelegama, the institute's Executive Director.

Up to 75,000 people have died in the north and east.

The war, since 1983, has wrecked havoc on the country's economy, dissuaded foreign investors and tourists and led to thousands of Tamils fleeing to the west and seeking political asylum or staying in refugee camps due to fighting in their hometowns.

Heavy battles broke out in the Jaffna peninsula recently after the rebels launched a fresh offensive, after a failed effort last December, to capture the strategic Elephant Pass military base.

Civilian officials in Jaffna said more than 12,500 people living near the Elephant Pass causeway had been trapped in the fighting and negotiations were on with Red Cross authorities to move them out. Tamil parliamentarian Anandasangari has written to President Chandrika Kumaratunga, urging her to evacuate the civilians to safer ground.

The IPS report was based on the impact of the war up to 1996 and on 1996 GDP rates.

It said estimating the full cost of the conflict was very difficult, if not an impossible task. "The human and social costs, disability, dispossession and psychological trauma associated with violence and terror are not really quantifiable."

"On the other hand, in assessing the costs of war to an economy, one would ideally calculate the destruction of production factors to determine the country's potential output without war and then compare this information with the actual output," it said.

The IPS study reflects a widely held view that the consequences of the ethnic conflict have been felt in every sphere of social and economic life.

Insecurity and vulnerability is prevalent among various sections of the population in addition to a feeling of despair and hopelessness among youth and an erosion of political, legal and social rights.

The defence budget has been ballooning over the years. Sri Lanka, traditionally a low defence budget country, has seen defence expenditure rise from below half percent of GDP in the early 1970s to an estimated six percent of GDP in 1995.

"This increase took place at a time when average defence expenditure in the developing countries as a whole was falling - to three percent of GDP from 7.1 percent in the1985-1995 period," the report said.

This is not the first study on the economic implications of the war. Three studies have been done previously, one commissioned by the National Peace Council - a local peace agency - and two by local and foreign researchers.

But IPS, while acknowledging those pioneering efforts, said there were several weaknesses in these studies as they were either based on limited data or of a more general nature. "These studies also routinely ignored the concept of value addition in production and do not draw any distinction between the gross value of lost production and its net value," it noted.

IPS said it was difficult to assess the direct impact of the war on economic growth, in which GDP has averaged around five percent in the past decade, since there were many factors in the growth performance of small trading nations like Sri Lanka.

"Nevertheless it is generally agreed that the conflict is responsible for a deceleration of economic growth," IPS added.

War affects not only the current level of output but also the level and efficiency of investments and thus lowers the long term growth rate. Several international studies, IPS noted, have explored the relationship between military expenditure and economic growth and most of these studies have found that the relationship was negative.

IPS said that military spending by the government between 1984 and 1996 totaled 287 billion rupees or was equivalent to 41 percent of Sri Lanka's 1996 GDP while on a conservative estimate military spending by the rebels would have been around 10 percent of the government costs.

The cost of dry rations and food to displaced people and losses from damage to infrastructure in war-torn areas and in Colombo, through rebel attacks, amounted to a total of 13.5 percent of the country's 1996 GDP.

IPS, referring to lost income since many people died during their most productive years, observed that though the cost in terms of mental agony suffered by widows, children and parents couldn't be quantified, the "pure economic costs of these lost lives is not minor."

These include not only the direct loss to the economy in terms of a reduced labour force but also because these deaths and injuries affect the productivity of others such as the families and friends of the victims.

"In our calculations, however, this effect has been ignored and it is assumed that the cost to the economy from the lost lives is solely the foregoing output due to the reduced labour force," the report noted.

IPS said that its study did not include a number of other costs that are difficult to quantify but are clearly substantial like reduced health stock - low weight, births and mental illnesses - and the corresponding higher health costs, general breakdown in law and order, brain drain, disruption to the education system and infrastructure bottlenecks created due to security measures.

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