Features
Escalating Fertilizer Prices and Subsidy Removal
by Dr Parakrama Waidyanatha
The Maha harvesting of rice is now nearing completion and the strong indications are that this season’s crop decline would be 40% to 50% due to lack of fertilizer. Concurrently, the yields of other crops too are dropping and the tea yields of 2022 could be the worst affected. According available information, whereas the 2021 producer price was only Rs90.33/kg green leaf, the cost of production was Rs94.05 and the corresponding values for 2020 were Rs92.15 and 68.18. On the other hand, increasing the purchase price of paddy to Rs 90 from about Rs 45 per kilogram, even at the prevailing high price of fertilizer, could theoretically double the net returns compared to previous years (Table 2). However all crops are yielding far less this year compared to previous years given the fertilizer scarcity and even when available, the prohibitive costs.
According to the 2021 Global Food Security rating, Sri Lanka has dropped down further from the previous position of 66th a few years ago to the 77th out of 113 countries. Of the food parameters, affordability, availability and quality, the worst decline is in the food availability index, as to be expected, with the current food shortages..
We have been hit by a ‘double whammy’. The decision to totally shift to organic farming or ‘green agriculture’, a term often proudly uttered by the Minister of Agriculture, and the total ban of chemical fertilizer imports without assessing the organic fertilizer availability. Of course the shift to ‘green agriculture’ is not for the love of ‘healthy food’, often uttered by many without knowing the scientific evidence, but because of the shortage of foreign exchange for chemical fertilizer imports. And as seen from the Table 2 below, organic fertilizer will be as costly as chemical at prevailing prices, and not all farmers have the raw material to produce their own organic matter requirements.
Escalating fertilizer prices
The key factors driving fertilizer prices up were a supply shortage in the global market and the growing costs of natural gas, which account for up to 80% of variable costs in producing nitrogenous fertilizers. Faced with the highly expensive energy resources, many European producers had to stop production as they couldn’t compete with counterparts in Russia, countries in the Persian Gulf and northern Africa. As a result, the global supply of fertilizer decreased which led to subsequent price increases. The impact of the Ukraine war is yet to be seen. The COVID epidemic, especially in the west as also the closure of some factories in the U.S due to the bad winter weather during 2021 also contributed to production shortages.
The unprecedented escalating of chemical fertilizer prices globally, as evident from the Table 1, will now make it difficult for the government to provide chemical fertilizer at heavily subsidized rates given the current foreign exchange crisis. In fact the government has, smartly lifted the ban on chemical fertilizer imports handing over the ‘baby’ to the private sector implying that if farmers want they can procure fertilizer at market prices. Then how can the President condone his faulty assertion that if he gives chemical fertilizer with one hand he will have to give the farmer a kidney with the other! Would private sector imported chemical fertilizer not cause the kidney disease? A recent report by the Health Secretary has stated that there is no evidence to implicate agrochemicals in the causation of the Rajarata kidney disease, a position that has been held by the majority of scientists but ignored by the President and the Agriculture Minister.
Table 1.Global Fertilizer Prices (USD/Mt)
The current global prices of not only ammonia and ammonia-based fertilizers(urea) but also of soluble phosphates and potash have increased by 250%.during the last 14 months!(Table 1). Increasing energy costs have also increased mining costs of potash and rock phosphate resulting in their comparable magnitude of increase as ammonium fertilizers. The forecast s that because of continuing supply chain constraints, in particular energy, the fertilizer prices will not come down in the near future.
The overall mean cost of chemical fertilizer at prevailing retail prices is about 24% of the total cost of production whereas it was only about 10% before the price escalation due essentially to subsidies and lower global fertilizer prices.
The data prior to fertilizer subsidy removal presented here are based on those published by the Department of Agriculture in 2019 as those for 2020 and 2021 are not yet available. The farm gate and retail prices of vegetables for 2021/2 were obtained from the Agrarian Research and Development Institute. The prevailing average retail fertilizer price of Rs 8,000 per 50 kg bag was used for 2021/2 calculations. In calculating the 2021/2 net returns which are hypothetical, it has been assumed that the yields were similar to those before the government’s banning of agrochemicals in April 2021. Clearly the farmers obtained much lower yields than before, but the hypothetical calculations were meant only to show that at prevailing farm gate prices, the farmers could have earned far more for many crops had they applied chemical fertilizers even at the current high retail prices. Of course the problem was that chemical fertilizer was not available until recently, and the high producer and retail prices were a result of low production.
Table 2. Fertilizer costs, producer prices and net returns for some crops before and after the price escalation
Fertilizer costs and producer prices
As evident from Table 2 data at the current farm gate (producer) prices, except for rainfed rice, tea and beans the hypothetical net returns have been much higher for the other crops in 2021/2 compared to 2019 because of substantial increase in farm gate (producer) prices consequent on the decrease in production due to fertilizer shortages and exorbitant costs apart from bad weather; and the corresponding increase in retail prices. The farm gate price of paddy increased by two fold with the government defining a paddy procurement price increase of 100%. By contrast, the mean farm gate tea price was 4% lower than the cost of production as pointed out above because of very high comparative increase in fertilizer price. Although the producer prices of brinjal, carrot and most other vegetables too increased several fold the farmers’, earnings were severely curtailed by low productivity due to unavailability of chemical fertilizer.
The writer has reservations regarding the maize yields and production costs as that is a crop cultivated in many parts of the dry and intermediate zones, especially Badulla and Moneragala with substantial returns. It may be because the Dept. of Agriculture’s return calculations are based on dry grain prices whereas a fair share of the crop is sold at comparatively high prices as tender corn cobs.
It should be noted that although, the government is vehemently promoting organic fertilizer under its so called ‘Green Agriculture’ program, except for rice and maize, it is more expensive to the producer than chemical fertilizer at prevailing prices (Table 2).
Judicious fertilizer use
Studies reveal that 60-70% of the applied nitrogenous fertilizer is lost through leaching, runoff and vaporization with most crops. Losses of some other nutrients too could be substantial though not as high as nitrogenous fertilizers. Farmers should be taught the principles of judicious fertilizer use through which substantial reduction in losses and costs could be saved. “Little and often’ is one important principle in judicious fertilizer use.
It would appear that with judicious use, especially application based on soil nutrient levels and crop demand, the fertilizer costs could be substantially reduced. Although there is some effort to promote fertilizer use based on soil and foliar analysis to determine the exacting crop nutrient requirements, it is not adequately popular because of the high analytical costs. The government should strengthen the relevant services and make them available at reasonable costs to farmers. The consequent fertilizer savings could be substantial.
Fertilizer subsidy
The fertilizer subsidy policy has been changing, especially with change of governments. The Government in 2019 continued the policy introduced during the interim Government in 2018 to provide fertilizer at the concessionary prices of a 50 kg bag of any type of straight fertilizer at Rs. 1,000 and a 50 kg bag of mixed fertilizer to Rs. 1,150.00 for crops other than paddy. The average subsidy borne by the Government on a 50 kg bag of paddy fertilizer then was around 86 percent of the market price.
A comprehensive study ( Ekanayake, H. K. J. 20060: Impact of fertilizer subsidy in paddy cultivation in Sri Lanka. Staff Studies; Central Bank of Sri Lanka, 36 (1 and 2): 73–92.) reveals that the fertilizer subsidy is not a key determinant of fertilizer usage in paddy cultivation. The study also found that there is a relatively higher correlation between fertilizer usage and paddy price than between fertilizer usage and fertilizer price. The author states that ‘the fertilizer subsidy could be withdrawn gradually over time. In its place, appropriate infrastructure and institutional facilities that are required to increase productivity in paddy cultivation and an effective mechanism for marketing the output that would result in favourable prices for paddy may be introduced for a more effective outcome’ The results of this study were also reported to be consistent with the findings of similar research in other countries.
Although the generally accepted view of economists is that governments should not indulge in business, would the above statement imply that if the Paddy Marketing Board is streamlined and effective, the paddy farmer can benefit substantially?
Further, a World Bank study(2013 ) entitled “What is the Cost of a Bowl of Rice” points out that the increase in farmers’ net income is small relative to the fiscal cost of the fertilizer subsidy, and that the government spends between Rs1.4 to 2.4 per acre to increase farm income by only a rupee per acre.
In conclusion, as evident in Table 2, the cost of the subsidized fertilizer in 2019 was 10.6% of the total cost of production that in 2022 without subsidy is 17.1%. However, because of the doubling of purchase price of paddy as also the highly escalated producer prices of other arable crops consequent on corresponding escalation of retail prices due to supply shortages, the increased fertilizer prices or subsidies had little bearing on the producer margins which were substantially higher in 2021/2 In other words, in this situation the fertilizer subsidy has no overwhelming impact on the cost of production of arable crops, and the government’s decision to ban the chemical fertilizer subsidy could lead to farmers moving towards more remunerative crops from rice, especially in the Yala season, in the Dry Zone, when it is more practical. However, the high retail prices is a huge burden to the consumer.
As pointed out above the increased cost of production by 4% over the producer price is would be devastating to the tea industry. The exorbitant fertilizer costs is reducing tea productivity substantially and the government should put in place either a price support scheme for the producer or a fertilizer subsidy which should only be 1-2% of the tea export earnings.
Escalated fertilizer prices should make rain fed rice farming especially in the wet zone unprofitable as seen in Table 2, implying that these paddy fields should be diversified into more profitable crops. In any case wet zone contributes only an insignificant quantity of rice to the national supply.
by Dr Gotabhya Ranasinghe
Senior Consultant Cardiologist
National Hospital Sri Lanka
When we sought a meeting with Hon Dr. Ramesh Pathirana, Minister of Health, he graciously cleared his busy schedule to accommodate us. Renowned for his attentive listening and deep understanding, Minister Pathirana is dedicated to advancing the health sector. His openness and transparency exemplify the qualities of an exemplary politician and minister.
Dr. Palitha Mahipala, the current Health Secretary, demonstrates both commendable enthusiasm and unwavering support. This combination of attributes makes him a highly compatible colleague for the esteemed Minister of Health.
Our discussion centered on a project that has been in the works for the past 30 years, one that no other minister had managed to advance.
Minister Pathirana, however, recognized the project’s significance and its potential to revolutionize care for heart patients.
The project involves the construction of a state-of-the-art facility at the premises of the National Hospital Colombo. The project’s location within the premises of the National Hospital underscores its importance and relevance to the healthcare infrastructure of the nation.
This facility will include a cardiology building and a tertiary care center, equipped with the latest technology to handle and treat all types of heart-related conditions and surgeries.
Securing funding was a major milestone for this initiative. Minister Pathirana successfully obtained approval for a $40 billion loan from the Asian Development Bank. With the funding in place, the foundation stone is scheduled to be laid in September this year, and construction will begin in January 2025.
This project guarantees a consistent and uninterrupted supply of stents and related medications for heart patients. As a result, patients will have timely access to essential medical supplies during their treatment and recovery. By securing these critical resources, the project aims to enhance patient outcomes, minimize treatment delays, and maintain the highest standards of cardiac care.
Upon its fruition, this monumental building will serve as a beacon of hope and healing, symbolizing the unwavering dedication to improving patient outcomes and fostering a healthier society.We anticipate a future marked by significant progress and positive outcomes in Sri Lanka’s cardiovascular treatment landscape within the foreseeable timeframe.
by Fr. Emmanuel Fernando, OMI
Jesuit Fr. Aloysius Pieris (affectionately called Fr. Aloy) celebrated his 90th birthday on April 9, 2024 and I, as the editor of our Oblate Journal, THE MISSIONARY OBLATE had gone to press by that time. Immediately I decided to publish an article, appreciating the untiring selfless services he continues to offer for inter-Faith dialogue, the renewal of the Catholic Church, his concern for the poor and the suffering Sri Lankan masses and to me, the present writer.
It was in 1988, when I was appointed Director of the Oblate Scholastics at Ampitiya by the then Oblate Provincial Fr. Anselm Silva, that I came to know Fr. Aloy more closely. Knowing well his expertise in matters spiritual, theological, Indological and pastoral, and with the collaborative spirit of my companion-formators, our Oblate Scholastics were sent to Tulana, the Research and Encounter Centre, Kelaniya, of which he is the Founder-Director, for ‘exposure-programmes’ on matters spiritual, biblical, theological and pastoral. Some of these dimensions according to my view and that of my companion-formators, were not available at the National Seminary, Ampitiya.
Ever since that time, our Oblate formators/ accompaniers at the Oblate Scholasticate, Ampitiya , have continued to send our Oblate Scholastics to Tulana Centre for deepening their insights and convictions regarding matters needed to serve the people in today’s context. Fr. Aloy also had tried very enthusiastically with the Oblate team headed by Frs. Oswald Firth and Clement Waidyasekara to begin a Theologate, directed by the Religious Congregations in Sri Lanka, for the contextual formation/ accompaniment of their members. It should very well be a desired goal of the Leaders / Provincials of the Religious Congregations.
Besides being a formator/accompanier at the Oblate Scholasticate, I was entrusted also with the task of editing and publishing our Oblate journal, ‘The Missionary Oblate’. To maintain the quality of the journal I continue to depend on Fr. Aloy for his thought-provoking and stimulating articles on Biblical Spirituality, Biblical Theology and Ecclesiology. I am very grateful to him for his generous assistance. Of late, his writings on renewal of the Church, initiated by Pope St. John XX111 and continued by Pope Francis through the Synodal path, published in our Oblate journal, enable our readers to focus their attention also on the needed renewal in the Catholic Church in Sri Lanka. Fr. Aloy appreciated very much the Synodal path adopted by the Jesuit Pope Francis for the renewal of the Church, rooted very much on prayerful discernment. In my Religious and presbyteral life, Fr.Aloy continues to be my spiritual animator / guide and ongoing formator / acccompanier.
Fr. Aloysius Pieris, BA Hons (Lond), LPh (SHC, India), STL (PFT, Naples), PhD (SLU/VC), ThD (Tilburg), D.Ltt (KU), has been one of the eminent Asian theologians well recognized internationally and one who has lectured and held visiting chairs in many universities both in the West and in the East. Many members of Religious Congregations from Asian countries have benefited from his lectures and guidance in the East Asian Pastoral Institute (EAPI) in Manila, Philippines. He had been a Theologian consulted by the Federation of Asian Bishops’ Conferences for many years. During his professorship at the Gregorian University in Rome, he was called to be a member of a special group of advisers on other religions consulted by Pope Paul VI.
Fr. Aloy is the author of more than 30 books and well over 500 Research Papers. Some of his books and articles have been translated and published in several countries. Among those books, one can find the following: 1) The Genesis of an Asian Theology of Liberation (An Autobiographical Excursus on the Art of Theologising in Asia, 2) An Asian Theology of Liberation, 3) Providential Timeliness of Vatican 11 (a long-overdue halt to a scandalous millennium, 4) Give Vatican 11 a chance, 5) Leadership in the Church, 6) Relishing our faith in working for justice (Themes for study and discussion), 7) A Message meant mainly, not exclusively for Jesuits (Background information necessary for helping Francis renew the Church), 8) Lent in Lanka (Reflections and Resolutions, 9) Love meets wisdom (A Christian Experience of Buddhism, 10) Fire and Water 11) God’s Reign for God’s poor, 12) Our Unhiddden Agenda (How we Jesuits work, pray and form our men). He is also the Editor of two journals, Vagdevi, Journal of Religious Reflection and Dialogue, New Series.
Fr. Aloy has a BA in Pali and Sanskrit from the University of London and a Ph.D in Buddhist Philosophy from the University of Sri Lankan, Vidyodaya Campus. On Nov. 23, 2019, he was awarded the prestigious honorary Doctorate of Literature (D.Litt) by the Chancellor of the University of Kelaniya, the Most Venerable Welamitiyawe Dharmakirthi Sri Kusala Dhamma Thera.
Fr. Aloy continues to be a promoter of Gospel values and virtues. Justice as a constitutive dimension of love and social concern for the downtrodden masses are very much noted in his life and work. He had very much appreciated the commitment of the late Fr. Joseph (Joe) Fernando, the National Director of the Social and Economic Centre (SEDEC) for the poor.
In Sri Lanka, a few religious Congregations – the Good Shepherd Sisters, the Christian Brothers, the Marist Brothers and the Oblates – have invited him to animate their members especially during their Provincial Congresses, Chapters and International Conferences. The mainline Christian Churches also have sought his advice and followed his seminars. I, for one, regret very much, that the Sri Lankan authorities of the Catholic Church –today’s Hierarchy—- have not sought Fr.
Aloy’s expertise for the renewal of the Catholic Church in Sri Lanka and thus have not benefited from the immense store of wisdom and insight that he can offer to our local Church while the Sri Lankan bishops who governed the Catholic church in the immediate aftermath of the Second Vatican Council (Edmund Fernando OMI, Anthony de Saram, Leo Nanayakkara OSB, Frank Marcus Fernando, Paul Perera,) visited him and consulted him on many matters. Among the Tamil Bishops, Bishop Rayappu Joseph was keeping close contact with him and Bishop J. Deogupillai hosted him and his team visiting him after the horrible Black July massacre of Tamils.
Sri Lanka-Singapore Free Trade Agreement
By Gomi Senadhira
senadhiragomi@gmail.com
“You might tell fairy tales, but the progress of a country cannot be achieved through such narratives. A country cannot be developed by making false promises. The country moved backward because of the electoral promises made by political parties throughout time. We have witnessed that the ultimate result of this is the country becoming bankrupt. Unfortunately, many segments of the population have not come to realize this yet.” – President Ranil Wickremesinghe, 2024 Budget speech
Any Sri Lankan would agree with the above words of President Wickremesinghe on the false promises our politicians and officials make and the fairy tales they narrate which bankrupted this country. So, to understand this, let’s look at one such fairy tale with lots of false promises; Ranil Wickremesinghe’s greatest achievement in the area of international trade and investment promotion during the Yahapalana period, Sri Lanka-Singapore Free Trade Agreement (SLSFTA).
It is appropriate and timely to do it now as Finance Minister Wickremesinghe has just presented to parliament a bill on the National Policy on Economic Transformation which includes the establishment of an Office for International Trade and the Sri Lanka Institute of Economics and International Trade.
Was SLSFTA a “Cleverly negotiated Free Trade Agreement” as stated by the (former) Minister of Development Strategies and International Trade Malik Samarawickrama during the Parliamentary Debate on the SLSFTA in July 2018, or a colossal blunder covered up with lies, false promises, and fairy tales? After SLSFTA was signed there were a number of fairy tales published on this agreement by the Ministry of Development Strategies and International, Institute of Policy Studies, and others.
However, for this article, I would like to limit my comments to the speech by Minister Samarawickrama during the Parliamentary Debate, and the two most important areas in the agreement which were covered up with lies, fairy tales, and false promises, namely: revenue loss for Sri Lanka and Investment from Singapore. On the other important area, “Waste products dumping” I do not want to comment here as I have written extensively on the issue.
1. The revenue loss
During the Parliamentary Debate in July 2018, Minister Samarawickrama stated “…. let me reiterate that this FTA with Singapore has been very cleverly negotiated by us…. The liberalisation programme under this FTA has been carefully designed to have the least impact on domestic industry and revenue collection. We have included all revenue sensitive items in the negative list of items which will not be subject to removal of tariff. Therefore, 97.8% revenue from Customs duty is protected. Our tariff liberalisation will take place over a period of 12-15 years! In fact, the revenue earned through tariffs on goods imported from Singapore last year was Rs. 35 billion.
The revenue loss for over the next 15 years due to the FTA is only Rs. 733 million– which when annualised, on average, is just Rs. 51 million. That is just 0.14% per year! So anyone who claims the Singapore FTA causes revenue loss to the Government cannot do basic arithmetic! Mr. Speaker, in conclusion, I call on my fellow members of this House – don’t mislead the public with baseless criticism that is not grounded in facts. Don’t look at petty politics and use these issues for your own political survival.”
I was surprised to read the minister’s speech because an article published in January 2018 in “The Straits Times“, based on information released by the Singaporean Negotiators stated, “…. With the FTA, tariff savings for Singapore exports are estimated to hit $10 million annually“.
As the annual tariff savings (that is the revenue loss for Sri Lanka) calculated by the Singaporean Negotiators, Singaporean $ 10 million (Sri Lankan rupees 1,200 million in 2018) was way above the rupees’ 733 million revenue loss for 15 years estimated by the Sri Lankan negotiators, it was clear to any observer that one of the parties to the agreement had not done the basic arithmetic!
Six years later, according to a report published by “The Morning” newspaper, speaking at the Committee on Public Finance (COPF) on 7th May 2024, Mr Samarawickrama’s chief trade negotiator K.J. Weerasinghehad had admitted “…. that forecasted revenue loss for the Government of Sri Lanka through the Singapore FTA is Rs. 450 million in 2023 and Rs. 1.3 billion in 2024.”
If these numbers are correct, as tariff liberalisation under the SLSFTA has just started, we will pass Rs 2 billion very soon. Then, the question is how Sri Lanka’s trade negotiators made such a colossal blunder. Didn’t they do their basic arithmetic? If they didn’t know how to do basic arithmetic they should have at least done their basic readings. For example, the headline of the article published in The Straits Times in January 2018 was “Singapore, Sri Lanka sign FTA, annual savings of $10m expected”.
Anyway, as Sri Lanka’s chief negotiator reiterated at the COPF meeting that “…. since 99% of the tariffs in Singapore have zero rates of duty, Sri Lanka has agreed on 80% tariff liberalisation over a period of 15 years while expecting Singapore investments to address the imbalance in trade,” let’s turn towards investment.
Investment from Singapore
In July 2018, speaking during the Parliamentary Debate on the FTA this is what Minister Malik Samarawickrama stated on investment from Singapore, “Already, thanks to this FTA, in just the past two-and-a-half months since the agreement came into effect we have received a proposal from Singapore for investment amounting to $ 14.8 billion in an oil refinery for export of petroleum products. In addition, we have proposals for a steel manufacturing plant for exports ($ 1 billion investment), flour milling plant ($ 50 million), sugar refinery ($ 200 million). This adds up to more than $ 16.05 billion in the pipeline on these projects alone.
And all of these projects will create thousands of more jobs for our people. In principle approval has already been granted by the BOI and the investors are awaiting the release of land the environmental approvals to commence the project.
I request the Opposition and those with vested interests to change their narrow-minded thinking and join us to develop our country. We must always look at what is best for the whole community, not just the few who may oppose. We owe it to our people to courageously take decisions that will change their lives for the better.”
According to the media report I quoted earlier, speaking at the Committee on Public Finance (COPF) Chief Negotiator Weerasinghe has admitted that Sri Lanka was not happy with overall Singapore investments that have come in the past few years in return for the trade liberalisation under the Singapore-Sri Lanka Free Trade Agreement. He has added that between 2021 and 2023 the total investment from Singapore had been around $162 million!
What happened to those projects worth $16 billion negotiated, thanks to the SLSFTA, in just the two-and-a-half months after the agreement came into effect and approved by the BOI? I do not know about the steel manufacturing plant for exports ($ 1 billion investment), flour milling plant ($ 50 million) and sugar refinery ($ 200 million).
However, story of the multibillion-dollar investment in the Petroleum Refinery unfolded in a manner that would qualify it as the best fairy tale with false promises presented by our politicians and the officials, prior to 2019 elections.
Though many Sri Lankans got to know, through the media which repeatedly highlighted a plethora of issues surrounding the project and the questionable credentials of the Singaporean investor, the construction work on the Mirrijiwela Oil Refinery along with the cement factory began on the24th of March 2019 with a bang and Minister Ranil Wickremesinghe and his ministers along with the foreign and local dignitaries laid the foundation stones.
That was few months before the 2019 Presidential elections. Inaugurating the construction work Prime Minister Ranil Wickremesinghe said the projects will create thousands of job opportunities in the area and surrounding districts.
The oil refinery, which was to be built over 200 acres of land, with the capacity to refine 200,000 barrels of crude oil per day, was to generate US$7 billion of exports and create 1,500 direct and 3,000 indirect jobs. The construction of the refinery was to be completed in 44 months. Four years later, in August 2023 the Cabinet of Ministers approved the proposal presented by President Ranil Wickremesinghe to cancel the agreement with the investors of the refinery as the project has not been implemented! Can they explain to the country how much money was wasted to produce that fairy tale?
It is obvious that the President, ministers, and officials had made huge blunders and had deliberately misled the public and the parliament on the revenue loss and potential investment from SLSFTA with fairy tales and false promises.
As the president himself said, a country cannot be developed by making false promises or with fairy tales and these false promises and fairy tales had bankrupted the country. “Unfortunately, many segments of the population have not come to realize this yet”.
(The writer, a specialist and an activist on trade and development issues . )
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