One of the constraints to agricultural development has been a lack of consistency in government policy towards agriculture. A case in point is the all-important issue of protecting agriculture. Inconsistency on the issue of protection for agriculture has had a serious impact on incentives for food production. At times the policy thrust has been for free imports and reduced tariffs, then suddenly imports of certain crops are banned or high tariffs are imposed. These inconsistencies leave the farmer with a great deal more uncertainty than he has to already cope with in normal circumstances.

The government is caught between the issue of serving consumer interests and farmer interests. However vacillating between serving these two masters ends up serving none. A long-run import policy on agricultural commodities geared to production targets is a vital need. As far as consumers are concerned any protection implies higher consumer prices, as international food prices are generally cheaper than domestic prices. While complete protection might result in entrenching a high cost inefficient agriculture, a degree of protection would be needed to ensure profitability of several vital crops such as paddy for a defined period of time.

The objective of pricing policies for agriculture should be to ensure remunerative reasonably stable prices rather than violently fluctuating producer prices. The crops for which such protection should be given should also be determined on the basis of long run viability and comparative advantages of crops. Environmental concerns should also be an important consideration. For instance there are environmentally positive reasons for encouraging and sustaining paddy cultivation, while there are negative environmental factors in expanding potato cultivation.

This discussion points clearly to a need for a national committee to go into the question of import policies for agricultural commodities and to establish the principles of protection clearly for about a five-year period. Since agricultural price policies are politically very sensitive, it is best if the technically determined policies have the approval of all political parties or at least the main political parties. Otherwise there could be reversals in policies that are detrimental for the long- run interests of agriculture.

Unsatisfactory marketing conditions have been an important factor in increasing consumer prices, on the one hand, and reducing producer or farm gate prices, on the other. Lack of competition and monopolistic conditions are no doubt one of the underlying reasons. In addition spoilage, poor packing, lack of grading and storage facilities, have contributed to the loss of agricultural produce. That in turn results in higher prices. The reduction of post harvest losses must be a priority concern as a significant proportion of produce is estimated to be destroyed. This reduces farm incomes as well as increases prices for the consumer.

The issue of marketing has been an intractable problem. Government institutions have failed and private sector efforts have been totally inadequate. Although the ultimate solution lies in making markets more competitive, interventionist measures may be needed to encourage such development.

Inadequate institutional credit has been a constraint to small- scale agriculture. Fifty-five years of institutional credit programmes have failed to deliver adequate credit at reasonable cost. Fundamental errors in design, unrealistic interest rate policies, an unsatisfactory credit culture, institutional incapacity and political interference have been responsible for this state of affairs. A non-governmental unsubsidised institutional credit scheme is more likely to succeed. Fundamental to the design of such a program would be a financial systems approach. Such an approach would be based on a realistic interest rate that covers costs and ensures the viability and sustainability of the credit program. It would also aim at developing an institutional capacity to deliver the credit effectively and to recover a larger proportion of lent funds. The crop insurance scheme in operation at present is of little relevance to most farmers. This should be revamped by making it a component of a reformed credit system.

Resources for the development of agriculture have been inadequate. Many of the proposals that are outlined here require considerably more resources to be expended for agricultural development. This includes funds for priority research and institutional development. The bifurcation of agriculture into several ministries, conflicts and lack of coordination between the central government and provincial governments and a weakened institutional structure, have all resulted in the performance of the agricultural sector being a drag on the country's economic growth. There is an urgent need to rationalise the ministerial allocations as well as have a clear functional allocation of responsibilities between the central and provincial governments.

Back to Top

Back to Columns

Copyright © 2001 Wijeya Newspapers Ltd. All rights reserved.
Webmaster