The increase in wheat prices would reduce consumption and imports of wheat, be a boost to paddy farming and improve the nutrition of people. The government has hailed the rise in prices of wheat as a favourable development for the country. The rise in international prices of wheat has been passed on to consumers resulting in a continuous increase in prices of wheat flour, bread and confectionary items.
It would however increase the cost of living, especially of urban dwellers and estate workers who have a preference for wheat flour based products such as bread and roti. Nevertheless it is claimed that it would be an overall benefit to the country as the substitution of rice for wheat would benefit the country’s trade balance, paddy farmers and the nutritional status of the country.
It is alleged that the habit of consuming wheat products increased owing to the PL480 programme of the US that gave wheat flour as aid for payment in rupees. These rupee funds were used by the US in Sri Lanka as aid to various projects in the country. The Canadian government too followed a similar programme for many years. Consequently wheat prices were kept low and wheat consumption in the country increased. It must however be recognized that the country was a deficit country in cereals and therefore had to import either wheat or rice. It is only in recent years that the country has reached near self-sufficiency. Therefore the PL 480 shipments of wheat were an important contribution to the country. Had we not received wheat as aid the country’s costs of imports would have been very high as either rice or wheat imports were needed to make up for the production-consumption gap in cereals. It is also reasonable to think that the nutrition of the poor would have been seriously affected.
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Nonetheless wheat consumption increased over time from about 20 kilograms per capita in the 1950s to over 40 kilograms per capita by the 1990s. The higher degree of self-sufficiency in rice that the country achieved was also partly possible as there was a substitution of wheat for rice and consequently the rice needs of the country was less. One could contend that there was a deception in the degree of rice self-sufficiency attained owing to the lesser consumption of rice because of the increased consumption of wheat.
It is asserted that the free imports of wheat were a disincentive to the paddy production. This appears valid on the surface, but is in fact not so as rice prices in the country have always been higher than international prices. Besides, there was a guaranteed price for rice from the late 1950s. This guaranteed price was much higher than the international price. For quite some time the country practised a dualistic price subsidization system. Rice was subsidized for the consumer through the rice ration scheme, while the producer was guaranteed a floor price much higher than the international price for rice. Therefore in spite of the lower consumer price, producers were given a high price.
There was no doubt about considerable deficiencies in the marketing system both under the guaranteed price scheme operated earlier by the Department of Agrarian services and later the scheme under the Paddy Marketing Board (PMB). This is so even at present as the government’s policy of purchasing paddy at a floor price is vitiated by corruption and inefficiency. In the last few years the increased production of rice and the policy of allowing free imports at election time created a glut in the rice market thereby depressing farm gate prices of paddy in tandem with lower retail rice prices.
The expectation now is that the higher prices for wheat would increase paddy prices for farmers. Such a development would be to the benefit of paddy farming, improvement of food security and would increase rural incomes.Nevertheless too much expectation from the price increase may be misplaced. Some of the expected improvements in paddy procurement prices may be subverted by middlemen, corruption of government officials, millers and lack of storage facilities in the country. Getting prices right is not a sufficient condition for increasing production.
There are several reasons for the yield gap. Researched yield levels are around 13 metric tons per hectare while the average yields in the country are about 4.5 metric tons. The reasons for this include an inadequate and inefficient extension service under the provincial councils, inadequate pure seed material, and cultivation of the wrong cultivars and lack of irrigation. Although a remunerative price would be an incentive to paddy farmers that alone will not suffice to get agricultural production and productivity rising.
As a result of the increase in rice production recently and the consequent more attractive consumer price of rice relative to wheat, rice consumption has risen and in effect the annual per-capita wheat flour consumption and wheat flour imports have been reduced since 2004. Per capita wheat flour consumption has come down to 29.22 kg in 2009 from 42.23 kg in 2005 according to the Department of Census and Statistics. There is no doubt that the substitution of rice for wheat would be a boon to the trade balance. Wheat prices have risen sharply in the international market and are likely to remain high owing to a sharp decline in the wheat crop in large producing countries, especially Russia. The rise in wheat import prices was threatening the trade account as a substantial increase in import costs was expected. As a result the substitution of rice for wheat would be of much benefit to the trade balance.
There are other benefits as well. The wheat flour generally available to the consumer is flour milled at the Prima Wheat Mills. This by agreement with the government is 70 per cent extracted wheat flour that is devoid of the nutrients in wheat. Consequently the consumption of wheat flour has resulted in a higher incidence of malnutrition, diabetes and heart conditions. The affluent are able to ward off this disadvantage by consuming higher cost enriched and whole wheat bread, but the bulk of the population is consuming poor quality wheat. Therefore the substitution of rice for wheat has a nutritional benefit. It is generally agreed that rice consumption is healthier.
The substitution of rice for wheat would benefit the country’s trade balance, paddy farmers and the nutritional status of the country. One could perhaps describe the rising prices of wheat as a blessing in disguise. This would certainly be so if there is an effective price for paddy at the farm gate level and the government supports paddy production adequately. |
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