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Business


   Govt. is determined to battle rice mafia  

Last year the country has produced 2.1 million metric tons leaving the spoilage aside and this itself is a great achievement. But, as I told you, what this mafia has done is, they have sold 350,000 metric tons of high quality rice for animal feed mainly to two companies in the country, as the worldwide corn prices have shot up. According to the Hector Kobbekaduwa Agrarian Research and Training Institute, last year’s gap between demand and supply of rice was only 79,000 metric tons and I take full responsibility about the authenticity of all the numbers I mention. Now, I think you can clearly see the picture and how this mafia operates

“They have sold 350,000 metric tons of rice for animal feed as the worldwide corn prices have shot up” - Hemakumara

By Indika Sakalasooriya
The Sri Lankan government last week imposed a price control on rice. Price controls are something almost all the economists frown at. Even the laymen who do not understand much economics, question whether the decision by the government to impose a price control is realistic in the present economic scenario in the country as the presence of rice cartels is obvious.

Then, what is the solution for this sky rocketing rice price in the country, if a price control does not delver the expected results? The economists who believe in demand-supply theory will say, let us flood the markets with imported rice at a low price and tackle the question of the rice cartels that are squeezing the guts of the general public.

On surface, the theory seems very simple and capable of providing the right solution. But, we all know that there is always a gap between theories that mould a certain human action and the reality as the externalities forever barge in. In the same way, the Sri Lankan rice crisis is supplemented by a food crisis the whole world is facing today, due to adverse weather conditions and climatic changes. Therefore, the option we have for importing rice to fill the gap, seems not so trouble-free.

Now you can see that the rice crisis the country is facing is homegrown and at the same time, global in nature. Therefore, it is crystal clear that we have to find a remedy for the crisis in between price controls and imports. Then what would be the way out? It is the march towards self-sufficiency, which many economists have rated illusive in the present global economic dependency state of affairs.

Here the Non-Cabinet Minister of Agriculture, Hemakumara Nanayakkara who is often an outspoken personality shares his views on the rice shortage the country is facing.

Following are excerpts of the interview.
Q: Many are attempting to describe the present shortage of rice in the country in a global context. Given the conscious efforts by all countries towards food security, this seems fairly true. As the Non-Cabinet Minister of Agriculture how would you describe the situation?
A:
I should say it is only partially true. Globally, the food prices are going up and in the same way, the rice prices have gone up. But, if we try to attribute the recent prices only to that fact, it is totally wrong and is a misinterpretation of the real situation. What we are experiencing today is a synthesized price hike by a handful of millers and traders who have got together as a mafia to make the maximum profits by keeping rice prices at a higher level.

Let us calculate the net cost for a kilo of rice. Generally, 1.5 kilos of paddy is used to produce one kilo of rice. The average prices the millers have been purchasing one kilo of paddy from farmers in the last few years was Rs.27, 28 and 29. Then we can come to a simple conclusion that 1.5 kilos of rice may cost Rs.45.00. According to our figures, milling costs and handling and transportation charges account for Rs.3.85 and Rs.3.00, respectively. Now we can calculate the net cost of a kilo of rice by getting the figures together as Rs.51.85. This is the net cost of a kilo of rice. I know you must be wondering why we have to buy a kilo of rice for Rs.80.00. The answer is, it is because there are a handful of millers who have got together as a mafia to gain maximum profits.

Q: Another factor even some of the economists are pointing out is that, Sri Lanka has a very high cost of production when it comes to rice. Therefore, what they are saying is that it is economically prudent to import rice than grow it. How would you tackle this statement?
A:
I should say that Sri Lanka does not fall under the countries which have a very high cost of production in terms of rice and if someone is saying otherwise, it is a diabolical lie. There are five factors that should be considered when we talk about cost of production; labour, water, seeds, fertilizer and tractor costs. As we all know, the government is giving a huge subsidy for every bag of fertilizer. The Sri Lankan farmers are getting a fertilizer bag worth Rs.2000 for Rs. 300. At the same time, not a cent is charged by the farmers in terms of water, like in some other countries. Needless to say, the government has to annually allocate enormous sums of money, to maintain all the big and small reservoirs and tanks that provide water for paddy. Sri Lankan farmers worry little about getting seeds. When it comes to labour, India has cheaper labour rates than us. But, when taken comparatively with the paddy cultivating countries in the South Asian and the South East Asian regions, the Sri Lankan labour is cheaper. In the same way, tractor costs are also on an average rate. So, how can one say that cost of production of rice in Sri Lanka is very high?

When it comes to productivity we are only behind Indonesia. Our average yield for a hectare is 4.5 to 4.8 metric tons and we are ahead of India, Thailand, Taiwan and Vietnam. That clearly shows that paddy cultivation is a very profitable business here. But there are various NGOs and INGOs that are trying to convince our people otherwise. What they say is to abandon paddy cultivation and go into high productive cultivations, for example such as gherkins and import rice instead. If we accepted what they had said, just imagine where we would have been today?

Q: Then what you are saying is the country does not have a demand-supply gap in terms of rice as some of the millers and traders vehemently claim?
A:
I’m not saying that there is no demand-supply gap. But what we have to find out is how such a shortfall of rice has presently taken place in the country. Last year the country has produced 2.1 million metric tons leaving the spoilage aside and this itself is a great achievement. But, as I told you, what this mafia has done is, they have sold 350,000 metric tons of high quality rice for animal feed mainly to two companies in the country, as the worldwide corn prices have shot up. According to the Hector Kobbekaduwa Agrarian Research and Training Institute, last year’s gap between demand and supply of rice was only 79,000 metric tons and I take full responsibility about the authenticity of all the numbers I mention. Now, I think you can clearly see the picture and how this mafia operates. I personally think that this underhand deal of 350,000 metric tons of rice for animal feed; is the result of a conspiracy by both the millers and the companies who bought the rice for animal feed. Due to the recent promotion of rice consumption by the government, the consumption of wheat flour in the country has come down by almost 50 percent. What these conspirators want is to keep the rice prices ahead of wheat flour prices and attack the government’s effort in promoting the rice eating habit among the Sri Lankan people. After committing an unpardonable social crime, now this mafia is hoarding rice, showing that they are simply ruffians who have no conscience.

Q: Some are of the view that government’s move to impose price controls for rice is not a very timely decision given the present global economic situation. What is your stance on this?
A:
It is the right decision at the right time and I believe that through a price control we can fight this mafia. There are countries in the world which have set examples for us to follow. Recently, Philippine’s President Gloria Arroyo ordered raids on the stores of rice traders who had hoarded rice and discovered 27,000 bags of rice and gave it to the people of the country who were suffering from high rice prices. Having a price control is not enough. The government should concentrate on buffer stocks to be taken out, for future situations like this.

Q: So you firmly believe that the government’s move to impose a price control on rice will work and deliver the expected results?
A:
Yes, I believe it. I believe that it will work and if not, we should put all our efforts to make it work. With or without price controls, countries like India, Thailand and Taiwan governments are closely monitoring their rice markets. So, why can’t we make it work? It is this mafia, I earlier described, who destroyed the Marandagahamula Millers which was started by the late Prime Minister D.S Senanayake. Marandagahamula being located in the Gampaha area has easy access by train and road. The key objective of starting the Marandagahamula Millers was to pump rice to the Western province, where 70 percent of the rice produced was consumed, without any delay, leaving no time for black marketers to operate. However, the mafia I mentioned earlier; completely wrecked the Marndagahamula Millers using their influence and black money.

Q: Including the JVP, many in the country have been saying that the group you are calling the mafia has the back up of a powerful minister in the government. What do you have to say about that?
A:
I don’t know about such a thing. But I have to say that if something like that is happening, we should use an all out effort to stop it.

Q: Earlier you said the government should have had buffer stocks to tackle the problem successfully. Witnessing an imminent global food crisis, what are the measures the Ministry of Agriculture has taken to ensure the food security in the country?
A:
The President’s ‘Api wavemu rata nagamu’ campaign which was launched several months back shows that we have recognised the situation and has buckled down to business. Last week, I sent a letter addressed to the President and Minister of Plantation urging that the barren lands which are with the regional plantation companies should be urgently cultivated. There are thousands of acres which are not properly utilised with these companies. In these lands, we can grow upland paddy, green gram, black gram, manioc, sweet potato etc. At the same time, there are a number of economically nonviable tea lands, especially in the midlands, that can be used to grow grass like Koinbetooth, Brackaria Brizanthia, Brackaria Mutica etc. as fodder for cattle. At the same time, anyone who needs land to cultivate should be given lands on a lease basis plus tax concessions. This is a time we should all unite and boldly face the problems we have and not a time to dash pots.

As a short term remedy, the government has struck a deal with Burma to import 100,000 metric tons of rice. To conclude the interview I should say the government is determined to go all the way in dismantling this mafia and to provide the people with rice at a reasonable price.

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Bilateral trade with Poland could be expanded

By Quintus Perera
Though we are extremely keen to promote bilateral trade between Poland and Sri Lanka there are some barriers such as the distance, the security situation in Sri Lanka and the lack of awareness of the trade potential of Poland in Sri Lanka, said Dariusz Karwowski, Commercial Counselor-Head of Trade and Investment Promotion, Embassy of the Republic of Poland in New Delhi at a Press Conference held at Trans Asia Hotel last week on ‘Business Opportunities in the Emerging Economies in the EU.’

A high level seminar on the subject preceded the Press Conference, which was organised by the Sri Lanka – Poland Business Council, Ceylon Chamber of Commerce. The seminar focused special attention on creating greater awareness of the growing potential, existing for developing trade and investment between Sri Lanka and the emerging economies in the EU.
The seminar covered three potential emerging economies in the EU, namely, Poland Romania and Hungary.

Karwowski said that they have decided to pay special attention to the Sri Lankan economy and said that there are many things in common to share between the two countries. He said that they have a range of products and they are extremely interested in promoting bilateral relations in South Asia.

He added that they have focused on many issues during the seminar and discussed the potential of each country and how they could be used towards mutual benefit.

He said in Poland, the annual growth rate is around six percent and the industrial growth is around 10 percent and Sri Lanka is perceived as a good potential country for cooperation. He explained that Poland has been engaged in the trade of industrial machinery, building industry machinery and food processing machinery.

He said as at present, Poland imports from Sri Lanka such items like tea, rubber based products, precious stones and textiles and Poland exports to Sri Lanka such items like steel, rubber products, paper, electrical and other machinery. Exports to Poland from Sri Lanka amounted to Rs 3.76 million while imports to Poland from Sri Lanka amounted to Rs 2.63 million. He said more than 50 percent of the exports to Poland from Sri Lanka have been tea.

He said that Poland has expertise on shipyard and ship building and Sri Lanka being an island surrounded by sea, it is another area they could develop in Sri Lanka.

At the seminar, the Chief Guest was Julian Wilson, Head of Delegation/Ambassador, Delegation of the European Commission to Sri Lanka and the Maldives and focused on trade with the EU, in particular the EU GSP Plus scheme. Ken Balendra, Consul General of the Republic of Poland was the Guest of Honour.

The European Union consists of 27 countries and a population of nearly half a billion. The EU makes up a huge market of potential customers and suppliers for businesses in Sri Lanka.

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