• Third-party buyers purchasing paddy directly from fields: Ranjith
• Market ‘mafia’ at play, Govt. must regulate rice prices: Karunaratne
• Enough stored paddy to feed country until year-end: Amaraweera

  Rice mill owners are warning of an impending shortage of paddy and the risk of a subsequent surge in rice prices in the coming months. 

They attribute this crisis to the unexpected accumulation of paddy by third-party consumers including farmers, primarily driven by sensationalist media coverage of the ongoing dry weather conditions. 

Speaking to The Sunday Morning, Small and Medium-Scale Rice Mill Owners’ Association President B.K. Ranjith expressed his concerns over the current situation, noting that mill owners were facing challenges in procuring enough paddy despite ongoing harvesting activities in various paddy-growing regions. 

A remarkable shift

While harvesting has already concluded in Puttalam and is underway in Anuradhapura, Polonnaruwa, and other areas, Ranjith noted that a remarkable shift had been observed this season. 

“Unlike previous years, many third-party buyers are purchasing paddy directly from the fields on the very day of harvesting. This trend has emerged due to the fear generated by media reports suggesting an imminent shortage of rice and subsequent price hikes.” 

According to Ranjith, the national rice stocks are substantial enough to meet demand for the next six months, but unwarranted panic has spurred individuals to stockpile paddy. “This fear-mongering has created a false scarcity,” Ranjith emphasised. 

Farmers are reportedly limiting their sales, anticipating higher prices soon, and this behaviour is further contributing to the manipulated market dynamics. 

According to Ranjith, both wet paddy (with 20% moisture content) and dry paddy are being sold at unusually high prices, with third-party buyers paying around Rs. 90 and Rs. 110 per kilo, respectively, directly to farmers. 

Ranjith dismissed reports that the ongoing drought had significantly impacted the current season, asserting that its effects might only become apparent if rains failed to arrive in time for the next cultivation cycle.

He also highlighted that the current price surge disproportionately benefitted large-scale mill owners, allowing them to amass greater quantities of paddy from farmers. 

“To preempt the looming price hikes, the Government might need to consider rice imports,” Ranjith suggested as a potential measure to stabilise the market.

Drought’s toll

 At least 13 districts are grappling with a harsh drought, caused by delayed monsoon rains that are yet to arrive as expected. The extended dry spell is wreaking havoc on agriculture and raising concerns about water scarcity in these districts. Agricultural activities have taken a major blow, with crops and paddy fields suffering damage due to the lack of sufficient water.

As per Agriculture Ministry statistics, more than 51,000 acres of agricultural lands, including crucial paddy fields, have been damaged due to the ongoing drought conditions. The situation is raising worries about food availability and clean water supply in the country. 

The Agriculture and Agrarian Insurance Board has reported that paddy fields account for 51,055.19 acres of the damage, while an additional 424.70 acres of other crops have suffered. Around 46,000 farmers are grappling with damaged crops. 

The hardest-hit area is the Kurunegala District, where nearly 30,000 farmers are facing losses due to the drought. In Udawala, over 14,000 acres have been damaged. 

In Hambantota, 1,800 acres of paddy fields have been hit, affecting 1,787 farmers. Similarly, 320 farmers in Polonnaruwa have been hit by damage to their crops, with almost 700 acres affected. The Anuradhapura District reports 292 farmers suffering due to damage to 336 acres of paddy fields.

Benefiting the few

 All Ceylon Farmers’ Federation (ACFF) National Organiser Namal Karunaratne cautioned that if the Government did not regulate rice prices in the market, it would eventually affect consumers. 

Karunaratne condemned what he referred to as a market “mafia” that had persisted for years, lamenting that a handful of mill owners were exerting undue control over the national rice market. He attributed blame to successive governments for not stopping this exploitation of farmers and consumers. 

The ACFF highlighted that Sri Lanka’s rice market was predominantly influenced by four key players, including a new entrant that it identified as a national asset funded by taxpayers who support the agriculture sector. Karunaratne urged the Government to revive State-owned rice mills, enabling them to regulate production and offer rice at lower prices. 

The absence of Government-operated mills leaves private mill owners, both small and large, in control of the market, despite the high demand. Karunaratne stressed that if the current Government failed to address this issue, the problem would persist. He also noted that past administrations shared responsibility for not addressing this market manipulation. 

The pressing need for Government intervention is evident, as the unregulated market continues to exploit both farmers and consumers. He pointed out that farmers received only a fraction of the earnings compared to mill owners and middlemen.

Karunaratne called on the Government to curb this “rice mafia” through strict implementation of the rice pricing formula. He stressed on the need to eliminate avenues that benefit mill owners and urged the Government to take control of the rice business, asserting that such mafias would persist unless addressed effectively.

Eroding reserves

 Karunaratne also expressed concerns about the Government’s absence from rice-purchasing activities.

The Paddy Marketing Board (PMB) has refrained from purchasing paddy due to the lack of sufficient funds. The PMB is reportedly facing financial challenges, with the Treasury refusing further funding due to its unsustainable debt of around Rs. 24 billion. The denial of funds has prompted questions about the board’s financial stability and its capacity to maintain a buffer stock for emergency situations.

Established in 1972, the PMB plays a crucial role in purchasing, selling, and distributing paddy and rice. Nevertheless, the Treasury emphasised on the need for a repayment mechanism for any potential funding and highlighted the current financial strain the PMB was experiencing. 

The PMB currently lacks a significant paddy reserve due to the lack of paddy purchases during the last Maha season. 

The Government had spent Rs. 13 billion during the previous season, purchasing paddy through District and Divisional Secretaries. This had then been processed by small rice mill owners and distributed to 2.9 million low-income families at no cost. However, there are no current food reserves to address potential future shortages. 

To secure these reserves, District and Divisional Secretaries are urged to retain some of the paddy stocks acquired during the last Maha season. Additionally, the board is encouraged to continue rice purchases, aiding in the Government’s efforts to uphold food security.

Preserving rice reserves

 When contacted, Minister Amaraweera told The Sunday Morning that the ongoing drought was leading to a significant drop in paddy production and it could result in higher rice prices in the near future, affecting the cost of a staple food for many. 

Despite the challenges, Amaraweera wished to reassure the public that there was enough stored paddy to feed the country until the end of the year. However, he warned that if the drought worsened, rice imports might become necessary. 

In such a backdrop, Amaraweera is to present a note to the Cabinet, highlighting the urgency of purchasing paddy for the PMB and maintaining food reserves to ensure food security. The Minister has advised the PMB to inform the Cabinet about the necessity of maintaining these reserves for food security and to prepare a comprehensive note for further actions.

Amaraweera emphasised on the necessity of Government-owned stocks to control potential future rice price hikes and to avoid inconveniencing consumers. The proposed Cabinet note aims to encompass these critical aspects, addressing the need for paddy purchases, food reserves, and effective price control strategies. 

The drought’s impact is expected to continue until October, with hopes pinned on the potential relief that rains could bring later in the year.