Importing rice once again: so much for self sufficiency

By the Economist

Once again the country is importing rice. Not so long ago we were celebrating the attainment of self-sufficiency, in fact even exporting a quantity of rice, out of national pride rather than good economics. Now we are compelled to import rice to cope with a shortfall in production in relation to market demand. The country is in a position where the demand for rice has increased at the very time there is a shortfall in production. Worse still the country has to import rice at a time when there is a shortage of cereals internationally and when international prices are high.

The President has ordered the import of 75,000 tons of rice to bring down the prevailing high prices for rice, currently touching Rs. 100 per kilogramme. There would be an immediate import of 30,000 metric tons of rice from India. This is in addition to imports from Pakistan. Apart from increased imports of rice, there has also been a release of 19,000 metric tons from government stocks into the market. Once again these developments throw light on the issue of self-sufficiency in rice that has been a political focal point over the years.

The high prices of rice are due to several reasons. The rise in the price of wheat flour has reduced the consumption of wheat-based products. Some estimates indicate that wheat consumption has declined by as much as 40 percent. According to some estimate, the consequent shift to rice has increased rice consumption to the order of 6000 metric tons per day.

The increased demand for rice has coincided with a short supply of paddy production in Yala. Release of rice stocks and earlier imports of rice have failed to stabilise prices. Rice prices are at a peak level. The increased imports of rice and the release of stocks may assuage the situation only marginally. The shift in consumption from wheat to rice is likely to continue as there is no prospect of a reduction in the price of wheat flour. At the same time international rice prices too have risen sharply and there is every prospect that the international rice price would increase further. The expectation that the Maha harvest would abate the rise in prices may be only short-term as the expected harvest is much less than that of previous years owing to unfavourable weather conditions at crucial times of the crop cycle.

The elation of an increase in rice production was such that people were encouraged to shift from wheat flour to rice. There was an expectation that rice production would increase each year to cope with the annual increase in demand for rice. In fact the expectation in rice production was more optimistic than that. Rice production was expected to outpace the domestic demand. There were discussions even on how to use the surplus paddy production that was expected. People were encouraged to eat rice rather than wheat. The increase in wheat flour prices ensured that shift. Now, whether you eat rice or wheat flour preparations, the increase in consumption would have to be met through imports.

The truth is that the country is still to reach self-sufficiency in rice. Just a couple of years ago we were boasting about achieving self sufficiency and exporting a quantity of rice. It is now clear that not importing rice in a single year does not amount to the attainment of self-sufficiency. This year's experience vindicates this position. Self-sufficiency means the ability to have adequate domestic production to meet the year-in-year-out needs of consumption. Agricultural production is dependent on weather factors and will have swings in production. The lean year’s shortfalls in production need to be supplemented by accumulated stocks. It is only when the good years can even out the bad that we could say that we have achieved self-sufficiency.

This means that the country must carry adequate stocks of rice. This column has pointed this out several times in the last two years when the harvest was good. The fact is that previous years’ good paddy production did not result in the country carrying large stocks. In fact it exposed the incapacity of the country to hold stocks too. There is an urgent need to have larger capacities for storage of paddy. These storage facilities should also be much improved from what they are today to ensure that storage of paddy does not result in a reduction of stocks due to pest attack or water seepage.

There is another side to the issue of self sufficiency. That is the welfare of consumers. The fact is that Sri Lanka is a high cost rice producer. The attainment of self-sufficiency in rice could mean that the consumer would have to pay more than for imported rice. Unless the costs of production are reduced and yields increased Sri Lanka would continue to produce rice at a higher cost than other countries. Nevertheless, the attainment of self-sufficiency has been an important economic goal and the objective of all governments. There may be economic and non-economic arguments for still pursuing the goal of self-sufficiency, but there is a need to recognise that the consumer would have to pay more for domestically produced rice.

If self- sufficiency is to be achieved and sustained, a whole range of policies have to be implemented effectively. These policies should be aimed at increasing production mainly through increased yields. The achievement of self- sufficiency requires an increase in the yields in paddy from their current average of around 5 metric tons per hectare to 5 to 6 metric tons. Although paddy yield levels in the country are high in comparison to those of many rice producing countries in Asia, yet they are much below the potential levels. What this gap indicates is a lack of institutional support measures such as extension and credit to raise yields closer to the potential.

Extension, credit and marketing are the weak links. Institutional credit serves only a small fraction of paddy farmers. The politicisation of rural credit has prevented sustainable credit provision to the majority farmers. Remunerative prices are a necessary pre-requisite to this end. Monopolistic paddy marketing and inadequate storage facilities have resulted in low prices to farmers at harvest time that have resulted in large marketing margins. In addition, loss of a significant proportion of crop through damage, labour shortages, high wage rates and low productivity are problems in paddy farming. These are the issues that must be addressed if self-sufficiency in rice is to be achieved. Self-sufficiency in rice is attainable if the rhetoric of attaining self-sufficiency is replaced by programmes to assist farmers to increase their productivity.