The Sunday Times Economic Analysis

The Sunday Times Economic Analysis By the Economist

Pandora's box of paddy problems
The increase in paddy production appears to have caused more problems than a shortfall. Suddenly a variety of problems are emerging for which immediate solutions are being sought.

Export of rice, government purchase of paddy, higher duty on rice imports, rice for Samurdhi recipients, three meals of rice for people, are among the plethora of solutions to the new " plenty paddy" problem.

The Ministry of Agriculture with its many ministers is grappling to find a solution. The IMF has also put its finger to try to stop some of the suggested solutions. The Minister of Trade has jumped on the bandwagon to tell the IMF that the government will protect the farmer.

The so-called "surplus" in paddy production has become a nightmare. As we pointed out in this column a few weeks back the increased production is not necessarily an indication that we have become a paddy surplus country. We have a "surplus" only because poor people do not have the money to purchase their requirements of the staple food. If only everyone had two square meals of rice there would indeed be a deficit. The main problem is that the marketing channels are inefficient and perhaps monopolised by a few traders who are able to drive down the price when production is high.

Further compounding the problem is that rice-milling capacities are inadequate. Consequently there may be a need to store paddy for a longer time. In turn there are inadequate paddy storage facilities. These are the issues that the new wave of increased production has brought to the fore.

To view it as a huge problem of excess paddy production may mislead the country to counterproductive directions in long run policies. We must recognise that we are a food deficit country and a country that has had trade deficits continuously for the past 25 years.

The country must take measures to further increase paddy production and improve productivity on paddy lands for several socio-economic reasons. It cannot afford to take the view that we are producing adequate rice and let the policies for increased production languish. There are several reasons for this. First, rice consumption would continue to increase, as there are many who do not have the purchasing power today that require to be fed.

Second, in spite of the population growth rate declining to around one per cent, there are thousands of new mouths to feed each day. Third the so-called surplus may turn into a deficit in the coming years owing to bad harvests. It is a well-known phenomenon of paddy production that the years of good harvests are followed by years of low harvests mainly owing to drought conditions.

Therefore the high production years must be counterbalanced by these years of poor harvests. And most important is the fact that increased productivity implies higher incomes to the farming community and rural areas where most of the poverty persists. Increased productivity on paddy lands is a pro-poor policy and one that could improve the nutritional standards of people.

The increased paddy production has certainly highlighted several basic problems that require to be addressed. These include an increased competitiveness in the purchasing of paddy There is a need to increase rice milling capacities in the main paddy producing areas. Storage facilities for paddy in producing areas and rice storage facilities in consumer locations are needed. Possibilities of industrial uses for rice require to be explored and the effective means of commercial ventures in rice-based products require attention.

Many of these measures may perhaps require some effective government interventions. Increased paddy production should not lead us to wrong directions in agricultural policies. The thrust for increased production and productivity of paddy must be continued in the long-run economic interests of the country, food security concerns, especially of rural households, improvements in nutrition, reduction in poverty, national security and for environmental and cultural reasons.

Certainly the policies that require formulating and implementing would differ in the new context of larger local production. There is a need to develop new cropping patterns and change land utilisation to yield higher returns on land. Issues of labour shortages in paddy cultivation, the emergence of part-time paddy farming and the economic viability of certain paddy lands are among the issues made more urgent by increased paddy production.

There are however no quick fixes for these fundamental problems. The immediate problem of paddy marketing should not be confused with the long-range issues of viable and productive paddy farming and a sustainable agriculture. We should also guard against foreign advice that tells us what to do on the basis of unimaginative applications of economic theories.

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