Fertilizer crisis: Cabinet Committee proposes policy reversal, but Ravi denies move
A fertilizer shortage triggered by stockpiling by traders as a result of a budget decision to swap an earlier subsidy on fertilizer to a cash payment, has led to a Cabinet committee deciding to temporarily revert to the old method until a proper formula is found, official sources said.
Reviewing the present crisis, the Cabinet’s Economic Management Committee (EMC) decided after a recent meeting to offer a subsidy to importers at the point of importation. The Ministry of Finance was asked to conduct a quick survey on the fertilizer prices and open up importing bulk fertilizers for paddy and other crops.
But responding to a question raised by a Sunday Times journalist at a media briefing on Friday, Finance Minister Ravi Karunanayake denied reports of a shortage, even though the shortage issue was raised by other Cabinet colleagues. He said no such subsidy would be offered for fertilizer imports.However the decision to temporarily revert to the subsidy process is clearly contained in the EMC minutes, seen by the Sunday Times. Further the EMC has appointed a committee comprising Agriculture Ministry Secretary B. Wijayaratne, Finance Ministry Secretary R H S Samaratunga, the Prime Minister’s Senior Advisor N.V.K.K. Weragoda, representatives from the Fertilizer Secretariat and the private sector has been entrusted with the task of making recommendations to tackle issues relating to the fertilizer subsidy and related matters.
It was stated that the committee was appointed to discuss this matter and make recommendations on the amount of subsidy and streamline the process enabling farmers to get fertilizer in accordance with their requirements.
Under the 2016 Budget, the Government decided to convert the subsidy to a cash allowance of Rs. 25,000 a year to encourage farmers to move away from using chemical fertilizers and to ensure that they are given good quality fertiliser, instead of the cheap kind that is often given on the subsidy.
However when the pros and cons of the new scheme and complaints regarding fertilizer shortage were discussed in length at the EMC meeting, several ministers informed the President that farmers face difficulties in purchasing fertilizer stocks. Farmers in Bandarawela, Welimada, Keppetipola and the Hambantota District were the worst hit by the fertilizer shortage, they said.
The Agriculture Ministry had reported that the fertilizer subsidies for paddy and other crops would be made available until February 29 as the voucher system is yet to be properly implemented.
At Friday’s hurriedly-called media briefing, Mr. Karunanayake said farmers protests were unfounded, and noted that bankrupt opposition political parties and certain government officials were behind the spread of rumors relating to fertilizer issues. He said there was no urgent need for fertilizer at the end of Maha season.
The Minister claimed that there were adequate stocks of fertilizer for the upcoming Yala season and a large stock of 92,930 MT is expected to be cleared from the Colombo Port.
EMC documents reveal that the present stock position of state-owned fertilizer companies is 97,972 MT and the private sector processed a stock of 166,599 MT. The total requirement for the season is around 70,000 MT.
Farmers countrywide have complained that there is a fertilizer shortage and traders have hidden their stocks. They are selling them at higher price than the price fixed by the Government, they charged. Traders in Anuradhapura and Polonnaruwa districts, it was reported, are selling fertilizers at high prices.
According to an EMC decision, the Finance Ministry has been directed to take appropriate action on the proposal submitted by Agriculture Minister Duminda Dissanayake to provide financial facilities from state banks to state-owned fertilizer companies.
Repeatedly denying queries on a fertilizer crisis, the ministry — in response to a question from the Sunday Times — denied the existence of the EMC-appointed committee. It said there was no need for a committee because there were no issues relating to current fertilizer subsidy scheme.
At the EMC meeting, Minister Sajith Premadasa had proposed that farmer cooperatives could be formed to facilitate the fertilizer distribution process. According to the Finance Ministry, about 750,000 MT of fertilizers are imported to Sri Lanka a year at a cost of more than Rs. 50 billion.
|Minutes of EMC meeting of Feb 16, 2016 |
It was explained that many issues have been reported and complaints received at the grassroots level about the shortage of fertilizer and that issues need to be rectified with immediate effect.It was also explained by the Minister of Agriculture that traders expecting a rise in the fertilizer prices in March 2016 are stocking fertilizer and waiting without issuing to the market.Further the issues due to the time consuming procedure to issue fertilizer and issues arising from fertilizer subsidy to other crops were also discussed.
After a lengthy discussion and a careful analysis of the situation, the committee instructions were given to offer the fertilizer subsidy at the point of importation. The Ministry Finance was requested to conduct a quick survey on the fertilizer prices and open up importing bulk fertilizers for paddy and for other crops. A committee was appointed to look into this matter and decide on the amount of subsidy to be granted and streamline the distribution process enabling farmers to get fertilizer as and when they want.
The committee comprising Agriculture ministry secretary, Finance Ministry Secretary, Senior advisor to the Prime Minister N.V.K.K. Weragoda , Representatives of the Fertilizer Secretariat and the private sector was appointed to make recommendations on this matter.