SME Bank to help in big onion production

A special project to assist big onion cultivators would be implemented by SME Bank in collaboration with the Agriculture Department of the Central Province during the Yala season.

Under this project selected big onion cultivators will receive a grant of Rs.50,000 from the government, the required technology and assistance from the Agriculture Department, and a soft loan of Rs.70,000 at a concessionary interest of 9% p.a. from SME Bank, with refinance provided by the Central Bank, to construct storage barns for preserving the harvests.

A discussion in progress

The total cost of a storage barn is estimated to be around Rs.150,000 and the balance Rs.30,000 will be the borrower’s contribution, the bank said.At the first phase of the project, 100 storage barns are targeted to be built in Dambulla, Kimbissa, Galewela, Devahuva, Naula and Kongahawela. The farmers who cultivate a minimum of one acre under big onions will be eligible for SME Bank loans, and they will be given three seasons to settle these loans out of the enhanced income.

The number of farmers cultivating big onions has continued to increase from 4,695 in 1998 to 17,870 in 2006. About 75% of them are in Matale and Anuradhapura districts. Total local production has increased from 17,893 metric tons in 1998 to 68,887 metric tons in 2006. Farmers in Matale district accounted for 35,377 metric tons produced in 2006 while production in Anuradhapura district amounted to 22,178 metric tons in the same year. The average yield however has not shown much increase mainly due to the non availability of quality seeds, the bank said.

SME Bank CEO Douglas Weerasinghe said that the big onion producers in Sri Lanka face two major problems -- wide fluctuation of the price of big onions leading to drastic decline of market prices after the harvest, and non availability of high quality big onion seeds.

During the glut after the harvest, the prices of big onions in major producing districts of Matale and Anuradhapura drop to between Rs.25 - Rs.35 per kg – leaving only a slender margin of profit to the farmers. After 2-5 months from the glut, the price per kilogram increases between Rs.60 - Rs.80 encouraging imports. If the produce can be stored during the glut and released to the market gradually after about 2-3 months, the farmers will benefit from higher prices while the consumer benefits from a moderate off-season price, the bank CEO said. For this purpose, proper storage that minimizes losses is necessary, as storing in farmer dwelling houses causes around 20 to 30 percent spoilage, he said. The storage barn designed by the engineers of the Agriculture Department is ideally suited to air-dry the onions under zero moisture eliminating fungal growth.

According to Weerasinghe, the demand for big onion seeds at present is about 35,000 – 40,000 kg per season and only 10% of that is produced locally while the balance is smuggled from India due to the prohibition of export of big onion seeds by India. The quality of smuggled seeds is substantially low and it results in low productivity of onions, he said.

Therefore, the demand for high quality local seed is very high and the price of a kg. of local seeds goes up to between Rs. 3,000 and Rs. 4,000. As more areas such as in Moneragala and Ampara Districts are being brought under big onion cultivation, there would be an increasing demand for big onion seeds in the future. Another reason is that farmers opt for cash crop cultivation instead of paddy which is an emerging trend. The demand for seed onion is expected to increase with the acreage increase causing a heavy demand for the seed produced in the Matale District, and farmers there would be encouraged to produce seed onions with the availability of storage barns.

Each storage barn could store 10,000 kg at a time of which 9,000 kg would be consumable onions which can be sold for around Rs.50-60 per kg, which is almost double the price during the glut, and the balance could be used for storing big onion bulbs till next season for seed production. In a barn out of 1,000 kg of the bulb stored, around 100 kg of big onion seeds can be produced.

Deputy Director of Agriculture, Central Province, Prasanna Pallemulla and his staff are implementing the project at field level by selecting suitable farmers, providing necessary technical assistance and coordinating the government grant component. They would supervise the use of funds and oversee repayment.

The SME Bank was established by the present government aiming to assist Small and Medium scale Entrepreneurs. It gives priority to export orientation, import substitution, employment generation and value addition projects.

Loan scheme for anthurium growers, paddy milling modernizations, loan for the SME Sector in Mahaweli areas to increase the farmer output by getting the farmers into commercial production while loans to selected producers of traditional handicrafts in the upcountry are some of the loan schemes implemented by SME Bank to build a strong entrepreneur culture and uplift the SME sector in Sri Lanka. The proposed loan scheme for big onion storage facility is a scheme to assist the low income farmers to become commercial farmers under the ‘Mahinda Chinthana’ programme of the government.