Sri Lanka to revive small scale rice millers to boost competition

ECONOMYNEXT – Sri Lanka will be providing one billion rupees in financing for the farmers’ guaranteed price paddy purchase program through small and medium scale rice millers in order to boost competition and correct government failure, a minister said.

“What we want to make sure is we put in place a set of policies where we try to reactivate competition in the milling market to solve the problem of market failure without causing a government failure,” Economic Reforms and Public Distribution Minister Harsha de Silva said.

“What happens sometimes is government failure happens. That is worse than market failure,” he said.

Responding to a question from a journalist on why he is resorting to interventions in a protected market to create competition, de Silva said there is now an oligopoly in rice milling due to poor government policy in the past.

“So why there is an oligopolistic structure in the rice milling market is because the structure has sort of got killed over a period of years,” he said.

“The small and medium rice miller is sort of non-existent and we’re trying to resuscitate them.”

“By doing that, we will create competition which will help both the farmer and the consumer.”

He said the Paddy Marketing Board which carried out the guaranteed price paddy purchase in the past, had collected 19 billion rupees in debt.

“Audits are done two or three years later, and sometimes there’s no rice and no money,” he said.

“Here we’re using only one billion rupees.”

“Using ICT, government officials and the District Secretary will monitor the progress daily and upload to a central IT platform,” he said.

“After suffering five harvest failures, rice farmers can get a guaranteed price on a bumper harvest this season to repay any of their past loans and get a good return.”

Farmers will be paid 35 rupees per kilo of naadu paddy, and 41 rupees for samba.

Under the new program, 300 small and medium scale rice mill owners who are members of the Sri Lanka Rice Producers’ Association will be able to offer farmers the state guaranteed price to buy 1,000 tonnes of paddy per day.

Sri Lanka Rice Producers’ Association Chairman Mudith Perera said around 50-60 percent of small and medium scale rice millers had closed their businesses over the past 10-15 years.

Currently, rice milling is dominated by a handful of large millers, including the President’s brother Dudley Sirisena.

De Silva said his ministry held around 18-20 rounds of talks with Sirisena to explain the scheme in detail.

“Our aim is to help the millers become competitive and then they can use their normal credit lines with banks to continue business,” de Silva said.

Talks have already been held with banks, he said.

The one billion rupees for the program have already been allocated, the minister said.

Perera blamed past governments for trying to remove import restrictions on rice.

However, a key problem in the Sri Lanka rice sector is that farmers do not produce export quality rice at competitive prices and bumper harvests. The industry does not bring extra foreign exchange. Instead, it produces large stocks of unsold rice in the domstic market, partly helped by guaranteed prices.

Sri Lanka Rice Producers’ Association Director Nishantha Attanayake said with the new program, any past criticism of Prime Minister Ranil Wickremesinghe and de Silva would be written off.

He said helping paddy farmers would create political dividends. (Colombo/Feb14/2019-SB)

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