The still has no plans for the Paddy Marketing Board (PMB), despite it being an important topic since rice shortages loomed last month.
Speaking to The Sunday Morning, Deputy Minister of Agriculture Namal Karunaratne, who was previously very vocal on subjects related to agriculture, claimed that the Government had yet to take firm initiatives regarding the PMB, as the administration was still new and had been burdened with many challenges from the outset.
“We are aware of the functions and uses of the resources of the PMB and we are aware of the challenges it is faced with. We do have initiatives keeping it in mind. However, these initiatives will have to wait for a future date until we resolve the more urgent crises relating to food shortages,” he said.
Since rice shortages loomed last month, the PMB has been in the spotlight, with one of the main allegations levelled against the previous Government being its failure to procure paddy for the State-owned PMB.
As a result, it is claimed that the local rice market is now in the hands of a rice monopoly.
The PMB’s role
The PMB, established under Parliament Act No. 14 of 1971, plays a vital role in maintaining the balance between paddy production and market stability.
Tasked with purchasing, selling, distributing, and processing paddy and rice, the PMB has exclusive rights to carry out these activities within the country. This Government institution aims to safeguard farmers’ interests while ensuring food security for the population.
Agriculture has long been the backbone of Sri Lanka’s economy, with nearly one-third of the rural population relying on it for their livelihood. It contributes approximately 10.1% to the nation’s Gross Domestic Product (GDP) and employs 28.5% of the labor force (Central Bank of Sri Lanka, 2014).
Paddy procurement
The PMB has been actively involved in paddy procurement during critical agricultural seasons.
For instance, in August 2022, the PMB purchased 282 metric tonnes (MT) of paddy on the fourth day of the Yala season’s procurement drive, with a cumulative total of 1,126 MT acquired over the first four days.
To facilitate this process, 73 operational warehouses were established in areas where harvesting and threshing were ongoing. By September 2022, it disbursed Rs. 250 million to farmers for paddy stocks procured during the Yala season.
In addition to stabilising the market, the PMB’s activities align with its broader mandate to ensure price stability for both farmers and consumers. This intervention becomes particularly critical given the volatility of agricultural markets and the vulnerability of small-scale farmers and low-income groups.
By acting as a buffer, the PMB addresses economic disparities and contributes to political and social stability in Sri Lanka.
Persistent challenges
When contacted by The Sunday Morning, PMB Chairman Manjula Pinnalanda, highlighted the persistent challenges faced by the board.
He said that while the Government allocated Rs. 500 million for paddy purchases, enabling the acquisition of 119,000 kg of keeri samba stored in Ampara, this was far from sufficient.
“Sri Lanka’s daily rice requirement stands at 6,000 MT, and the PMB’s storage facilities – though numbering 305 – are often in disrepair due to long periods of disuse. In contrast, private sector entities utilise advanced storage solutions like silos, highlighting a significant gap in infrastructure,” Pinnalanda said.
Pinnalanda further explained that the PMB also grappled with severe financial constraints. Despite selling rice at Government-mandated subsidised rates, the board has accrued debts, amounting to approximately Rs. 28 billion.
These debts are gradually settled with Government assistance and the PMB’s adherence to debt obligations has maintained its credibility with financial institutions, allowing it to secure new loans when necessary.
However, operational inefficiencies further exacerbate its financial challenges, Pinnalanda lamented.
“For example, the PMB operates with only one lorry and lacks adequate drying facilities, managing to dry only 14% of its rice stock while the private sector, in contrast, possesses sufficient dryers and modern logistical systems to handle larger volumes,” he said.
Addressing these challenges requires a strategic approach. Pinnalanda emphasised the urgent need to modernise infrastructure, including the construction of silos for effective rice storage, stating that such advancements would mitigate the risk of shortages and ensure the quality of stored paddy.
“Additionally, enhancing staffing levels and securing increased funding are critical to enabling the PMB to fulfil its mandate effectively. Investment in advanced drying and transportation facilities will also bridge the operational gap between the PMB and private sector competitors”, he also said.
Financial distress
The latest audit report from the National Audit Office (NAO) sheds light on the dire financial state of the Paddy Marketing Board (PMB).
According to the report, the PMB has been selling paddy stocks at prices lower than both market value and production costs. This pricing strategy has resulted in significant financial losses, prompting it to secure annual credit facilities from the Treasury and State banks to fund future paddy purchases and cover these losses.
Between 2009 and 2014, the PMB obtained credits and advances from two State banks for purchasing paddy and covering operating expenses. By 31 December 2020, the total amount owed had ballooned to Rs. 22,652.79 million, with an additional accumulated interest of Rs. 28.67 million. The report notes that these financial challenges raise serious concerns about the board’s ability to continue as a viable entity.
Further scrutiny reveals a consistent decline in the PMB’s net assets over recent years. From a negative value of Rs. 12,548.69 million in 2017, the board’s net assets worsened to Rs. 13,266.65 million in 2018, Rs. 14,176.43 million in 2019, and Rs. 14,656.26 million in the latest year under review. This downward trend underscores its growing financial instability and highlights its reliance on Government financial assistance to meet its liabilities.
The NAO report stresses that these financial difficulties not only jeopardise the Board's operational sustainability but also raise critical questions about its long-term viability. Without substantial Government intervention or strategic reforms, the PMB’s capacity to fulfill its mandate remains in doubt.
To address these issues, the report calls for immediate attention to the board’s ‘going concern’ status – its ability to operate effectively without the risk of closure.