Courtesy Island

December 8, 2019, 9:20 pm

By D. C. P. Amarasekere

In Sri Lanka, the paddy farmer who is central to the ‘nation’ has been cruelly displaced in national policy for decades. Most Sri Lankan political leaders remember the farmer in cycles, and it typically coincides with an election. Every election season the farmer makes a come-back, front and center, on election agendas. The candidates vie for the 2 million plus farmers’ votes almost like in an auction, each outbidding the other, by using bigger and better subsidies and handouts. The fertiliser subsidy and the buying rate for paddy are the two most salient grievances that dominate political debates. To set the record straight, there is a wide gap between the “farm-gate price” (the price that farmers get for selling paddy), and the price which consumers pay for rice. However, this is always exaggerated. While the gap between the consumer price and the farm-gate price ranges between 20-30%, the farmers, politicians, and NGOs imagine this to be as high as 100%. The exaggeration may not have an empirical basis, but it helps demonize the exploitative forces such as banks, millers, retailers and other intermediaries in the paddy-rice value chain. The seasonal demonization helps with self-preservation, not limited to-, but particularly of politicians. The symbiotic relations between politicians (at all levels) and business interests notwithstanding, political candidates market themselves in theatrical fashion as brave soldiers fighting to eliminate the exploiters from the paddy-rice value chain and restore the rightful dignity of the Sri Lankan farmer. After the elections, the status quo resumes.

Given that the newly-elected President Gotabaya Rajapaksa presented the most comprehensive set of policies, programmes and initiatives in the area of agriculture during his campaign, it is important that we hold him, the Minister of Mahaweli, Agriculture, Irrigation and Rural Development in the interim cabinet – Mr. Chamal Rajapaksa, the State Minister of Agriculture – Mr. Vidura Wickramanayake, and the government accountable to deliver on the much-needed reforms in agriculture. The newly elected President has walked into a putrid political system as well as an economy at the brink of a collapse. However, some quick measures need to be taken to address the crisis in agriculture in Sri Lanka. This article is intended to highlight a couple of “stylized facts” about income and labour of paddy-farming households in order to push the agenda beyond the fertiliser subsidy and the farm-gate price. The declining welfare among farming households and opportunities for farmers give a clear indication that we have to innovate in order to survive.

Farming Households Always Operate at a Loss

First, let us look at the basic balance sheet of a farmer. This calculation carries two disclaimers: 1) the numbers are derived from day-to-day conversations with farmers over the past couple of decades in a village in the Hambantota District, but accurately reflect the figures for the Maha season of 2018; and 2) perhaps contrary to popular understanding, the vast majority of smallholder paddy farmers employ agricultural labour for most farming-related tasks. In this village, on average, a farming family cultivates between 1-1.5 acres of paddy land. From cultivation to harvesting, a paddy season lasts roughly 5 months. On average, to cultivate one acre of paddy, a farmer incurs the following expenses (per acre of paddy):

Second, let us calculate how much the paddy farmer (who cultivates one acre of paddy), earns at the end of the 5-month season. Based on national figures, the paddy harvest per acre during the 2019 Maha season was roughly 1,900 kilos. If the farmer sells his harvest to the government at the current price of Rs. 38, he/she will earn an income of Rs. 72,200 at the end of the 5-month season.

It is interesting to note that the farmer’s average monthly income during the season seem to be barely above Official Poverty Line (OPL) in 2016 which is Rs. 4,166. In conversations with farmer households (consisting of two adults and two children), the monthly expenditure was recorded as follows:

This means, farming households incur a loss of Rs. 431/day, Rs. 12,930/month, and roughly about 1.5 lakh per year. This loss is always settled by incurring debt, borrowed mostly from local loan sharks at exorbitant interest rates. Year after year, the debt increases, as the earnings are rather low. While this is a simplified view of the infamous ‘farmer debt’ issue, it gives a rough idea of the sustained nature of debt in farmers’ lives. Many of them die indebted to a number of creditors, and not all of them are banks. A Sri Lankan farmer, at the end of his life, may owe 2-3 million or sometimes even more. The debt that is owed to individuals who typically tend to be ‘strongmen’ in the area, is automatically transferred to the wife and the children of the farmer. Farmer debt is a never-ending cycle that is of inter-generational nature.

Alternatives and the Role of the Government

One cause of this bleak situation of the paddy farmer is the extremely low productivity. Compared to other South Asian and Southeast Asian countries, Sri Lanka’s productivity is significantly low. But one should not be fooled to think that improving ‘productivity’ simply means an increase in rice production. ‘Improving productivity’ means increasing yields and cutting the cost of production simultaneously. In fact, producing more and more rice is counterproductive. An excess supply of rice to the market causes prices to fail, which in turn does not help the farmers’ situation. If the price falls below the cost of production, the farmer incurs losses and struggles to pay the debt he had accumulate during the season and any arrears from previous seasons. One important point that current and future policymakers need to understand is that the demand for rice is flat. In other words, there is only so much rice that we can eat, and for the past 20 years, the average annual consumption of rice has been approximately 110 Kilos per person. This means the domestic consumers are incapable of absorbing a glut of rice on the market.

While the next option is to export rice to foreign markets, it is easier said than done. For decades, the global market preferences have been in favour of long-grain cultivars such as Thai, Pakistani and some Indian rice varieties. The demand for the Sri Lankan short-grain varieties is comparatively very low as they do not appeal to the palette of rice consumers in most other countries, nor can they be used in recipes in the gourmet food or fast food products. A new demand, however, can be created (globally) on the basis of the health benefits of eating Sri Lankan varieties of rice, but this would require a well thought out and medium- and long-term branding and marketing programme at the national- and international levels. As the investment on such a strategy would be substantial, we must maximize our usage of rice and its by-products such as paddy husk, rice bran, and broken rice.

Approximately 575,000 metric tonnes of rice husk is produced in Sri Lanka every year, and utilizing and disposing this low-value by-product as been a challenge for millers and farmers. However, paddy husk has been successfully used as a soil conditioner for mulch, and as a biofuel for furnaces. It is also used for insulation and as packaging material, a cleaning agent for steel and iron, a raw ingredient in producing cement, and fillers for the plastic industry. Paddy husk has been used as fuel in several industries, especially in rice processing mills. Furthermore, rice bran has been successfully used to produce rice bran oil which has a number of health benefits as well as a growing demand in the international market. Similarly, broken rice can be used to make cereals and health drinks. Rice can also be used to make liquor such as sake in Japan. Regrettably, most of these ventures are not undertaken in Sri Lanka. These ventures may be too capital-intensive for farmers to undertake, but they offer new avenues of income for millers and other intermediaries. The idea is not to demonize the millers and the other intermediaries in the rice value-chain in Sri Lanka, but to create opportunities and markets for all stakeholders. Having said that, the millers and other intermediaries need to be regulated, taxed, and their employees must be paid EPF/ETF. An uncontrolled mushrooming of millers has led to frequent fluctuations of millers’ income, which in turn has led to a high degree of precarity in the labour they employ. If they are given opportunities to produce new value-added items for export, it could create a win-win situation in which the millers’ incomes are increased and stabilized, and the state coffers gain foreign exchange. As the millers do not have the technological wherewithal, the government must take the initiative to introduce small production plants that are used in other parts of the world to entrepreneurs in Sri Lanka. Last week, the new President, in an interview on the state’s role in supporting technological innovation spoke convincingly about the state’s role in putting in place the basic infrastructure that is necessary for such innovation. This suggestion, I believe, fall under the umbrella of the ‘basic infrastructure’ that is necessary for innovation in agriculture. The state, together with the private sector, would have to assist with marketing new agricultural products in the global markets until the required marketing skills are inculcated in the new generation of agricultural entrepreneurs in Sri Lanka.

If producing more rice does not necessarily improve the lot of farmers, what can the government do to help their household economies? The key to cracking this lies in maximizing farmers’ labour. A farmer works only 20 days in a 5-month period. This goes back to a point made earlier in this article that the vast majority of smallholder paddy farmers employ agricultural labour for most farming-related tasks. One might ask, what he/she does during the remaining 130 days. The blunt answer is – nothing. This has been the pattern over the years, and regrettably, it has become a part of the rural farming culture. The solution to improving farmers’ incomes lies not in increasing the value of handouts or free inputs of production, but in allocating their under-utilized time for producing high-value agricultural products.

Many innovations can be proposed in this respect. For example, in the dry zone where kohomba (azarirachta indica) and mee (madhuca longifolia) trees grow in abundance, farmers’ can be allocated state land to grow mee for medicinal purposes and kohomba for timber. Kohomba and mee seeds can be used to produce fertilizer, cosmetic products and biofuels. Similarly, farming cooperatives can be encouraged to produce wood apple and other fruit and vegetable varieties that are indigenous to the area. Ranawara, Beli flowers, Murunga and other herbal parts can be processed into fine teas for which there is increasing global market demand. Cultivating rare and indigenous plant and flower varieties that have international market value (such as cactus) is another viable enterprise. A quick glance at the trees, herbs and flowers that grow in the northern and southern dry zones in the country suggests that many value-added agricultural goods can be produced by farmers in both regions. With two international airports in the southern and northern tips of the country, these products could be easily transported by air to any country in the world. State support for farmers to move into value-added agricultural products should open up opportunities to unite farming interests of the south and the north of the island. Those who are inclined to use their time on manufacturing non-agriculture related products can be encouraged towards brickmaking and producing cement blocks for construction. To guard against an over-supply of agricultural produce of the same kind in a given season (eg. an excess of pumpkin because everyone is growing pumkin), the state can regulate by maintaining an upper limit of production for each crop. The point is to make productive use of farmers’ underutilized time and encourage them to move into value-added agriculture, however, guarding against them flooding the market with the same kind of produce. All this needs careful planning, taking into consideration the terrain, climate, soil, access to water, and the skills of farmers in a given region. Monetary support for such ventures can be implemented through Anyonyadara Samithi in rural areas that already operate as community development mechanisms.

The options are many. It is the government initiative and the support in terms of creating markets and branding that is much needed. The job of the President who is committed to agriculture and competent Minister and State Minister of Agriculture must be to explore these avenues of innovation and work with farming communities to diversify agricultural production. It is the responsibility of the Minister and the State Minister of Agriculture, in collaboration with the private sector, to find international markets for these products, work on a long-term branding plan for Sri Lankan agricultural products, and improve connectivity to transport the products from the farm to the table. In other words, there is a lot more we could try as a country before we call agriculture a “failure”.

The farmers also have to do their part and meet the government halfway. They have to snap out of the dependency mentality. The dependency of farmers is not figment of capitalist imagination. It is a reality created by politicians to exercise control over the farming population over decades since the country’s independence. The fertiliser subsidy in Sri Lanka dates back to 1962 is a case in point. Its main objective was to make access to fertiliser easy and affordable to farmers, thereby stimulating high-yields in paddy. Since then, however, despite both the contribution of agriculture to the country’s Gross Domestic Product (GDP) being just 7%, and the massive expenditure on providing the fertiliser subsidy (currently Rs. 15 billion), no government has moved to suspend the system. This is because as much as one-third of the labour force is employed in the agricultural sector, and the large voter base of farmers (around two million) immediately made the subsidy into a highly ideological political tool crucial to state-building. In addition to fertilizer, other inputs of production, are also subsidized, if not provided free of charge. We have now reached a point at which the farmers’ safety net has turned into a hammock that lulls able-bodied people into lives of complacency and dependency. Most Sri Lankans would agree on the basic level of not wanting their tax rupees used to fund complacency and further indebtedness among farmers. The farmers have to realise that and take control over their lives that have been on autopilot for too long.

If the new President and his government are serious about making any noticeable difference in the farmers’ lives, the agenda has to go beyond the fertiliser subsidy and the purchasing rate of paddy. It is time to step out of this comfort zone, and explore creative ways to secure the vote-base of farmers. Some proposals above may not be the most comfortable options in the short-term, but they are necessary if we are to envisage a future of agriculture in Sri Lanka. The government’s and farmers’ failure to innovate in agriculture will only expedite the process of transitioning to the hands of global agribusiness. Before we know it, our land and labour will be controlled by global agribusiness, especially in the face of agreements such as the MCC. But if we utilize our land and labour more effectively, this process can be slowed. The choice is ours. Innovate or perish.