The Sunday Times Economic Analysis

The Sunday Times Economic Analysis By the Economist

Will we import rice again this year?
A bumper harvest last year of over three million metric tons led to the notion of the country having reached self-sufficiency in rice. Good weather and an increase in the cultivated extent in the North and East were mostly responsible for this record harvest.

This year's paddy production could be very different. It is likely to be less in the coming Maha 2003/2004 than that of last year. Will the country once again import rice?

Several factors account for a possible decline in paddy production. The weather in some parts of the country has not been particularly hospitable. In other parts, low prices have been a disincentive to cultivation of paddy with optimum inputs of fertilizer.

In still others, farmers have not cultivated lands as a protestation of the low paddy prices last year. There have also been some compensatory increases in extents cultivated as well. The overall picture that emerges is one of a lower production in Maha that is nearing harvest time.

Currently the pre-harvest prices of paddy in the producing areas are running high around Rs 16 per kilogram. Last year's euphoria of attaining self-sufficiency in rice is best forgotten, even though there is a possibility of not importing rice this year, if the shortfall in Maha could be offset by an increased Yala harvest.

This may not happen as the cyclic nature of rainfall suggests that the irrigation tanks may not receive adequate water for storage to enable a larger extent of cultivation in Yala. There are also other factors that could affect the levels of paddy production adversely.

The much-advertised reduction in fertilizer prices that were generated by the Budget Speech has not been realised. The increase in the subsidy on fertilizer has been negated by increases in other taxes and costs. The only consolation to the farmer may be the higher purchase price for paddy this year owing to the reduction in paddy production. This would be especially so if the Yala harvest too is lower than the previous one.

The fact is that the country is still to reach the level of self-sufficiency in rice. This column pointed this out last year, when the focus was on celebrating the attainment of self-sufficiency, that what was achieved was the non-importation of rice in a single year. In fact this year's experience may vindicate this position. Self-sufficiency means the ability to have adequate domestic production to meet the year-in-year-out needs of consumption. Agricultural production so dependent on weather factors will have swings in production. The lean years' needs must be provided through accumulated stocks. It is only when the good years can even out the bad that we could say that we have achieved self-sufficiency.

Last year's paddy production did not result in the country carrying large stocks. In fact it exposed the incapacity of the country to hold stocks. There are many hungry mouths to be fed. If they have access to their basic requirements of food, even last year's production would not have been adequate. The demand for rice is also depressed by the increasing consumption of poor quality wheat flour. When these and other factors are considered the celebration of self-sufficiency is utterly misplaced.

If we import rice this year, the hollowness of the claims of self-sufficiency will be clearly exposed. Without entering the contentious issue of whether or not the country should aim at a sustainable self-sufficiency by weighing its costs and benefits, what are the needed policies to increase paddy production?

Although paddy yield levels in the country are high in comparison to those of many paddy-producing countries in Asia, yet they are much below the potential levels. What this gap indicates is a lack of institutional support to raise yields closer to the potential.

Extension, credit and marketing are the weak links. The Department of Agriculture has demonstrated how these could be overcome in some pilot projects. Yet this strategy remains unexplored in the country owing to shortages of resources.

Institutional credit serves only a small fraction of paddy farmers. Despite some new innovations, the politicisation of rural credit has prevented sustainable credit provision to the majority farmers. Monopolistic paddy marketing and inadequate storage facilities have resulted in large marketing margins.

In addition, labour shortages, high wage rates and low productivity plague paddy farming. These are the issues that must be addressed rather than gloating about attaining self-sufficiency in rice whenever there is a little surplus.

Back to Columns