The rice processing industry is the largest agro-based industry in the country, turning more value of product than any other industry. Rice is the staple food of the people in Sri Lanka and it is the livelihood of the majority of farming families.
Paddy production and marketing
The production of paddy has occupied an extremely important place in the agriculture sector. On average, from 2019 to 2023, 771,792 hectares (ha) were cultivated during the Maha season and 462,665 ha during the Yala season, making the average annual land extent sown with rice to about 1,234,457 ha and Sri Lanka currently produces 4,553,800 metric tonnes (MT) of paddy annually. The annual paddy production is a relative figure taken by using the findings of the crop estimation survey on paddy done by the Department of Census and Statistics (DCS).
Farmers sell their marketable surplus of paddy to different buyers or institutions. There are five types of first-hand marketing outlets for paddy such as private collectors, mobile traders, private millers, the Paddy Marketing Board (PMB) and the Multi-Purpose Cooperative Societies (MPCSs). This induces social heterogeneity among buyers which leads to increased competition, resulting in relatively higher prices.
Private collectors, mobile traders and private millers purchase more than 90 % of the marketable surplus of paddy of the farmers in a given season. The collectors and mobile traders sell paddy back to the private millers. The financial strength of the millers places them in a very advantageous position to purchase and hold stocks of paddy. The farmers don’t have to incur costs for transporting paddy in this case and buyers often purchase paddy with higher moisture contents (at a discounted price).
They usually purchase paddy immediately after harvest when the prices are low. Some of the collectors, mobile traders and millers provide credit facilities for the farmers for financing their cultivation operations and also provide inputs in kind (such as chemicals) and hire their land preparing (tractors) and threshing machines on credit basis and later get them back. During the season with a high production of paddy, prices in the open market go down severely and these buyers purchase paddy much below the floor price set by the Government. However, in the lean seasons, paddy prices in the open market rise above the floor price and there is severe competition among the millers to purchase paddy.
The two types of institutional first-hand marketing outlets are the purchasing centres (paddy stores) of the PMB and the MPCSs and the paddy is purchased at the prices fixed by the Government. The farmers are required to transport their paddy to these purchasing points.
These two institutions are purchasing paddy subject to the pre-specified quality criteria in respect of the moisture content, extraneous matter, and sand, etc. The Government presented the minimum purchasing prices for paddy for the 2023/2024 Maha season were Rs. 105 for nadu, Rs. 120 for samba and Rs. 130 for keeri samba paddy varieties with a moisture level of 14% (wet basis [w/b]). But, these institutions purchase only a limited quantity of the marketable surplus of paddy available with the farmers (roughly about 10%).
Rice milling
There are two types of rice produced in Sri Lanka, namely raw rice (white raw rice, samba raw rice and keeri samba raw rice) and parboiled rice (nadu, samba and keeri samba). Nearly 65-70% of the total paddy production is subjected to the process of parboiling which is a pretreatment given to paddy to improve its storage, processing and nutritive qualities. The majority of the rice mills are equipped with parboiling facilities. Parboiling at present is a highly labour-intensive process and as a result, the cost of parboiled rice is higher than raw rice. Raw rice is rice produced from fresh paddy.
There are two main forms of rice mills in the country, namely custom rice mills and commercial rice mills. Both raw and parboiled rice are processed in these rice milling plants. Hundred percent of the custom milling capacity and 95% of the commercial milling capacity are owned by the private sector. Hence, private sector millers play a major role in the rice processing sector.
The custom rice mills are those that mill paddy belonging to farmers for a milling hire. These mills are available in each and every village in paddy producing areas. The farmers bring their paddy to these mills when they require rice. Normally, custom mills have only two machines for de-husking paddy and polishing rice. The small combined mill which consists of de-husking, paddy-rice separation, polishing and de-stoning, are now popular among custom millers.
The commercial rice mills are those that mill paddy purchased from growers and produce rice for sale in the open market. These mills are available mainly in major paddy producing areas. The commercial rice mills can be categorised in to three main types depending on the machinery used for milling, namely, semi-modern, modern and extra modern. These mills can be again categorised as small-, medium-, and large-scale and leading millers according to their processing capacity. The small-scale millers process five-10 MT of paddy per day and all semi-modern mills are under this category. The medium-scale millers can process 10-20 MT per day. Most of the modern mills are in this category. Large-scale millers have modern or extra modern mills and can normally process 20-50 MT per day. The leading millers have extra modern mills and can process over 50 MT per day.
The majority of the commercial millers are in the medium- and large-scale category and these millers process a comparatively large quantity of paddy than small-scale and leading millers. They are spread all over the country, especially in main paddy producing areas like Polonnaruwa, Anuradhapura, Kurunegala, Hambantota, Ampara, Vavuniya, Gampaha, and Badulla. All these Districts have rice millers’ associations too. These millers make a significant impact on the rice price even though individual millers or millers’ associations are unable to do so.
Emerging leading rice millers can create a monopoly in the rice milling industry. These millers are even able to control the price of rice. Hence, it is important to look after the small-, medium- and large-scale rice millers all over the country. The rice requirement per day is approximately 6,500 MT and hence, it is required to process a minimum 10,000 MT of paddy per day, assuming the milled rice recovery as 65%. This requires only 200 large-scale millers having the capacity of 50 MT per day or 500 medium-scale rice millers having the capacity of 20 MT per day.
Although the rice milling industry is the largest agro-based industry in the country and the majority of the population depends on this industry either as a farmer or as a consumer of rice, there are problems in the industry. Some of the small-, medium- and large-scale mills have not been operated or operate at a lesser capacity due to these problems. Hence, it is important to address issues of this industry.
Rice recovery levels
Test milling needs to be conducted to the proper measurement of the rice recovery level. At the end of the test milling, the output will be head rice, broken rice, rice points or rice tips, bran, discoloured rice, impurities and paddy husk. Accordingly, the average milled rice recovery level could be measured. The rice recovery level depends on the rice variety, the paddy quality, the available machines, the processing steps, and the percentage of bran removal.
The rice grain (rough rice or paddy) consists of hull or husk, the bran layer, and the germ. The hull or husk constitutes about 20-22% of the paddy weight whereas the bran layer is about 8-10% and the germ is about 2-3%. Theoretically, milled rice recovery is around 70% (at 5% bran removal), whereas the achievable milled rice recovery is about 68%. The present average milled rice recovery is about 65% for parboiled rice and 62% for raw rice. A higher milled rice recovery could be obtained from parboiled paddy than raw paddy. The milled rice recovery level of long grain rice is higher than short grain rice and hence, the milled rice recovery level of nadu is higher than samba and also samba is higher than keeri samba.
Sometimes, millers complain that the milled rice recovery level is around 60% or below that level. The majority of the farmers use combined harvesters for harvesting paddy. The combine harvesters are unable to remove immature grains and some impurities due to the high moisture content in the paddy at the time of harvesting. Millers purchase high moisture paddy. They dry and process this paddy. At the processing, immature grains and impurities are removed and hence, the actual weight of the processed paddy is less than the paddy taken for processing. This may be the main reason for giving a lower milled rice recovery level at present. The millers used to remove a higher percentage of bran layer for getting a more-whiter colour in the white rice and light red in red rice. This will also reduce the milled rice recovery level.
Market channel from farmer to consumer
Paddy is produced mainly in the North Central Province, the North Eastern Province, the Southern Province and the North Western Province. Paddy passes through five major channels.
Farmer Middle Level Collector Rice Processor Wholesaler
Consumer Retailer
Middle level collectors buy paddy directly from farmers and sell to millers. Rice processors or millers buy paddy from farmers directly or middle level collectors. Wholesalers buy rice from millers directly and sell to retailers. The retailers sell rice to consumers.
Some of the private mill owners have their own sales outlets and they also distribute the rice through their own fleets of vehicles to the doorsteps of the wholesalers or retailers. Consumers purchase rice from retailers. The PMB uses both PMB mills and private mills to process paddy. Rice milled by the PMB is supplied to institutional buyers like Lanka Sathosa. The MPCSs usually have their own rice mills to process the paddy. The rice milled by the MPCS mills is sold through the MPCS branch network.
The Government allows to import rice during a rice deficit. Sri Lanka imports rice mainly from India and Pakistan. The establishment of a taxing system for rice imports is essential to maintain the market stability during a rice deficit. The importer’s profit margin is proposed to be retained similar to the profit margin of the rice millers and the importer’s selling price should be the same as the miller’s selling price. The import price of rice should be adjusted to be compatible with the importer’s selling price by adding a tax to the actual invoice value accordingly. There is an import duty on imported rice and at present, it is Rs. 65 per kilogram (kg) as per Government information. The Government should not reduce the price of imported rice lower than that of controlled price. It will badly affect the rice industry: the rice millers and subsequently the farmers.
Total production and the estimated market quantity of rice
The annual average paddy production is 4,553,800 MT. Due to the use of improper post-harvest technologies, serious quantitative and qualitative losses are encountered during post-harvest operations such as harvesting, threshing, cleaning, drying, storage, parboiling and the milling of paddy. The post-harvest quantitative losses occurring in paddy amounts to approximately 10% of the annual production and equal to 455,380 MT. The seed paddy requirement is around 123,446 MT. Hence, the total paddy available for consumption is around 3,974,974 MT per year. The annual Raw rice production is around 862,569 MT (assuming the milled rice recovery level as 62% and Raw rice consumption is about 35% from the total paddy production) and the annual parboiled rice production is around 1,679,427 MT (assuming the milled rice recovery level as 65% and that the parboiled rice consumption is about 65% from the total paddy production). Hence, the total average annual rice production is approximately 2,541,996 MT. The per capita consumption of rice fluctuates around 110 kg/year depending on the price of rice, bread and wheat flour. The population in 2023 was 21,893,579. Hence, the annual rice requirement for human consumption was 2,408,294 MT. All these commercial activities and calculations are based on 14% moisture content (w/b).
Governmental controls on rice distribution
The changing political, economic and social policies with special reference to the agriculture industry and trade resulted in a free-market atmosphere and competitive environment. The paddy and rice trade were no exception to this market behaviour. With these liberalisation policies, the private sector started entering the paddy and rice industries on an unrestricted scale, and thereby, Government intervention in rice marketing has declined and the private sector role has increased. However, the Lanka Sathosa, which is the main marketing organisation which operates all over the country, and the MPCSs of the country engage in the stabilisation of the rice price and the maintenance of food security through procurement, storage, processing and the distribution of paddy or rice. These organisations protect consumers by stabilising the controlled price for rice set by the Government right around the country. They are also entrusted with ensuring guaranteed prices for paddy farmers.
At present, most of the agricultural produce is freely marketed through private sector trade operating in organised markets. Most agricultural commodity markets operate under the normal forces of demand and supply. In order to save the farmers from the cartels of traders and encourage farmers to undertake the cultivation of rice and other food grains, the Government also fixes guaranteed prices and makes arrangements for their purchase on the State account whenever their prices fall below the support level through PMB.
Since the commencement of economic liberalisation in 1977, the role of the PMB was gradually curtailed. The Regional Rice Research and Development Centre of the PMB was re-established as the Institute of Post Harvest Technology in 2000 and presently it is the National Institute of Post Harvest Management (NIPHM). Technical competency on rice milling is hardly with the PMB now and it is with the Agriculture Ministry’s NIPHM.
(The author is an engineer and the former Director/Chief Executive Officer of the NIPHM)
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The views and opinions expressed in this article are those of the author, and do not necessarily reflect those of this publication