Rice: Fish or cut bait

Friday 12th March, 2021

Gazettes are a dime a dozen in this country and whether they serve any purpose is anyone’s guess. The maximum retail prices of some varieties of rice have been gazetted, but neither millers nor traders give two hoots about them. Rice prices have gone through the roof again. A government plan to buy more paddy from farmers purportedly in a bid to vie with the private millers in the rice market has come a cropper; it asked farmers to sell part of their produce to the Paddy Marketing Board (PMB), etc., in return for the fertilizer subsidy. Private traders offered slightly higher prices and hoarded paddy so that they could manipulate the market. They always have the last laugh.

More than 4.6 million metric tons of paddy are currently available in the country, and therefore the rice price hikes are not due to any shortage, farmers’ associations have pointed out. Usually, the powerful rice millers create artificial shortages ahead of harvesting seasons, compelling governments to import rice. When rice imports arrive, prices of paddy plummet and millers make a killing. They release some of their paddy stocks to the market thereafter, causing a drop in the demand for the imported rice, which remains unsold in state warehouses and is eventually sold as animal feed at ridiculously low prices; the state suffers colossal losses. (The previous government was accused of causing a loss of about Rs. 10 billion to the state coffers due to rice imports.) The millers then restrict the supply of rice causing price increases. Farmers’ associations have accused some key state officials of colluding with the millers’ mafia.

There are many venal public officials ready to do anything if there is money in it for them, but the millers would not have been able to manipulate the paddy and rice markets with impunity without political backing. Politicians usually roar, but they purr before the millers who have slush funds to bankroll election campaigns.

The government cannot be faulted for demanding that farmers sell part of their produce to public institutions, tasked with preventing market manipulations by private traders, because the state spends a lot of money on the fertilizer subsidy. But the prices the state outfits offer to farmers should be reasonable. The government must also ensure that the private millers who outbid the PMB, etc., do not sell rice above the maximum retail prices.

Most farmers are beholden to private traders, who give them loans for cultivation purposes on the condition that they do not sell their produce to others. They are in the clutches of loan sharks including micro finance companies. The State has made no intervention all these decades to address this issue which enables big-time millers to exploit producers and consumers alike. Small-time millers are without enough funds to purchase paddy, and when they receive the loans they apply for, there is hardly any paddy left for them to purchase. Many small mills, which helped make the paddy and rice markets somewhat competitive have gone belly up. These issues should receive the attention of the political authority. Perhaps, President Gotabaya Rajapaksa, who has evinced a keen interest in finding speedy solutions to issues troubling the rural folk, can ascertain information about the debt trap farmers are entangled in, when he visits villages under the Gama Samaga Pilisandarak programme. Besides, if the current food production is managed properly with storage and distribution facilities developed to curtail post-harvest losses and ensure that producers get a better deal, it may be possible to obviate the need to bring more land under the plough at the expense of the country’s precious forest cover.

A short-term solution to the problem of rice price hikes may be for the government to determine the maximum retail prices realistically and tell the big-time millers in no uncertain terms that non-compliance will be met with raids on their warehouses. This should be child’s play for a government whose leaders boast of having defeated the world’s most ruthless terrorist organisation, unless some of its grandees are in league with the millers’ Mafia. Gazettes and rhetoric will not do. The government had to fish or cut bait.