• Approval pending for Rs. 2 b fund for 2 months
• Faces potential transfer to Treasury
• Operations suspended since 2022

The billion-rupee losses incurred by the State-run Paddy Marketing Board (PMB) remain unsettled despite the suspension of the paddy purchasing mechanism by the Government two years ago, as learnt by The Sunday Morning.

It is reliably learnt that the Cabinet had not approved the request made by Agriculture Minister Mahinda Amaraweera to allocate a total sum of Rs. 2 billion for paddy purchasing during the ongoing Maha season.

Despite the non-allocation of funds by the Treasury, Amaraweera told The Sunday Morning that the PMB had purchased a few stocks of paddy by utilising the board’s funds.

As revealed in the latest audit report issued by the National Audit Office (NAO) on the PMB, the operations of the board for 2023 has resulted in a loss of Rs. 1,248.74 million, compared to a corresponding loss of Rs. 741.66 million in 2022. Accordingly, a deterioration of Rs. 507.08 million has been observed in the financial results. 

This deterioration is mainly due to a decrease in other income by Rs. 36.80 million and an increase in financial expenditure by Rs. 717.23 million in the year under review compared to the preceding year, as revealed by the NAO.

The creditors’ balance of Rs. 7,115.84 million as of 31 December 2020 included balances of Rs. 6,723.67 million related to a period of more than four years, Rs. 278.94 million related to a period between three and four years, Rs. 64.97 million related to a period between one and three years, and Rs. 48.25 million related to a period of less than a year. 

This balance also includes a sum of Rs. 6,684.55 million payable to the Treasury and the balance had not been settled as at 30 April 2023, according to the NAO.

It is further revealed that as the paddy stocks purchased by the board were sold at a price lower than the market price and cost, action had been taken to secure credit facilities from the General Treasury and State banks annually to procure the funds required for the purchase of paddy for the upcoming season and to cover the loss incurred from the sale.

Out of the credits and advances obtained from the two State banks for paddy purchasing and operating expenses from 2009 to 2014, it was revealed that the accumulated amount to be paid by 31 December 2020 was Rs. 22,652.79 million and the accumulated interest was Rs. 28.67 million.

According to the NAO, the value of net assets of three preceding years and the year under review has continuously decreased from the negative value of Rs. 12,548.69 million in 2017 to a negative Rs. 13,266.65 million in 2018, further decreasing to a negative value of Rs. 14,176.43 million in the year 2019 and to a negative value of Rs. 14,656.26 million during the year under review. 

This has adversely affected the going concern of the board. Accordingly, it had been observed that the board lacked financial strength to meet its liabilities without financial assistance from the Government.

It is further revealed that poverty alleviation of the farming community by purchasing the harvest at the certified price from farmers and ensuring food security by maintaining buffer stocks in the country are the prime objectives of the PMB.

Although there were 356 storages belonging to the board with a capacity of 327,285 MT in seven provinces to achieve those objectives, the board had only 7,511 MT of paddy in seven provinces as of 26 July 2023. Accordingly, it has been observed that only 2.3% of the total storage capacity had been in use as of that date. Further, a sum of Rs. 105.02 million had been spent as the salaries for 136 employees of the board.

In such a backdrop, Amaraweera stated that if the Treasury were to deny finances again, the PMB would be transferred to the Treasury. “The losses incurred by the PMB are not solely due to a failure of the board but due to decisions taken by the Government from time to time,” he stressed.

Meanwhile, All-Island Farmers’ Federation (AIFF) President Namal Karunaratne urged the Government to resume PMB operations and to purchase paddy at a reasonable rate from farmers.

“The Government must keep the paddy sector under its control. When the Government doesn’t have stocks, how can it demand? If the board remains inactive, private players will take the entire control of the country’s paddy business as well as the rice market,” he stressed.