Trader Exploitation of Cultivators: A Major Cause of Inflation.

By Prof Tissa Vitarana (LSSP)

The people of Sri Lanka are suffering severely as a result of the high cost of living (inflation). The present Ranil Wickremesinghe led government is not ready to intervene on behalf of the people to reduce inflation. In fact, the government publicly encourages traders to raise prices as they like by telling them that their main objective should be to supply goods to the market. The inflation rate increase exceeds 60% and that of food is about 90%.

With the high cost of food and the failure of the government to increase salaries or allowances, both in the state and the private sectors, the people are faced with hunger and even starvation. A large number of the sources from the Lanka Sama Samaja Party (LSSP) inform us that in many families parents have only one meal a day so that the children can have two. The composition of the meal was rice and Pol Sambol. This may fill the stomach but the problem is the inadequacy of proper nutrition.

For instance a full plate of rice gives sufficient energy (carbohydrates) but it will give less than 50% of the protein requirement for growth. There is also lack of essentials like vitamins and minerals. The lack of these will particularly affect children. It is a crying shame that many children do not go to school due to this. Some of those go are reported by the media to be fainting due to hunger. This would not only affect the present generation but future generations as well.

Further I gather from MRI sources that more than 70% of families have an income below the poverty line. This would mean that they are suffering from a lack of food, besides other essentials. I was shocked to learn that the level of malnutrition, which was around 14% about a year or two ago has now gone up beyond 20%. The probability is that among children under five years of age, one out of every five will be malnourished. Not only their physical development but also their mental development will be retarded.

It is a well known fact that among farmers there is chronic debt. This is because they do not get any income until the time of harvest. Depending on the monsoon this period may vary from three to four months, only twice per year. Till the income is received the farmers get their requirements from the village traders in advance at a high interest rate. They are then at the mercy of these traders and other money lenders. They are forced to sell their produce to the lenders well below the market price. In many cases all the money they earn goes to pay their debt and they have to resort to further loans till the next crop is harvested.

Due to the inadequacy of their income many people, specially the housewives obtain micro finance at high interest rates to buy goods like sewing machines. Much of the income they get from such a source is also eaten up by the high interest rates of the lenders. These people get caught in a debt trap and this leads to their failure to pay the interest rates, and they are charged much higher penal rates on the shortfall. This forces to these women to pawn or sell their jewelry, and some eventually are driven to commit suicide.

The above situation has recently got aggravated by the shortage and high prices of fertilizers, due to political and administrative blunders. The LSSP is committed to promoting organic farming. But this must be done gradually and systematically using raw material available in the village. There is also a need to produce suitable seed varieties locally. The seed varieties available in the market is dependent on chemical fertilizer. The agriculture department should revise their policies accordingly.

Another factor causing food inflation is the monopoly by certain middlemen which affects the food crisis.

For example the conversion of paddy to rice used to be undertaken by both private and government mills. The government role in this process now is defunct. The Paddy Marketing Board does not purchase paddy and their mills are not functioning. It is a sad fact that many of the government mills had been sold to the private sector, while the balance are corroded and sold as scrap metal. The government has allowed five big millers to enjoy a monopoly and this enables them to fix prices at a low level. The competition by smaller mill owners had been eliminated to a larger extent by thuggery and damage to their mills.

Besides the continuous exploitation of the farmers as described above, there is a high rate of exploitation in the marketing process based on the neoliberal policies popularized in Sri Lanka after the UNP came to power in 1977. The chain of profiteering that has been established in Sri Lanka is massive. For instance the vegetables produced by the farmers of Nuwara Eliya are bought by local traders who make a profit by selling them to wholesalers in Dambulla. The Dambulla traders sell to the traders in Manning Market in Colombo, who then sell it to the Exclusive Economic Centers (EECs) scattered around the country. From these centers, after making a suitable profit, they are brought by the retailers. The latter make further profit from the consumer, who is at the end of this profit chain. The magnitude of this is evident when we compare the rupee prices per kilogram:

Producer’s Price paid by

selling price Consumer

Green Chillies 80-90 400-500

Brinjals 200-250 500

Potatoes 150-200 450-500

Tomatoes 250-300 600-650

Nadu rice 90-100 220-250

Samba rice 105 250 -275

The above chain of profiteering by the middleman was eliminated when Dr. N.M. Perera was the Minister of Finance in the Coalition Government of 1970, when a severe economic crisis was faced by the country (1972/3). He mobilized the LSSP. CP and other progressive forces to establish an effective producer and consumer cooperative system. They directly dealt with each other eliminating the above chain of profiteering by a variety of middlemen, and the farmer got a proper price for his produce and the consumer had only to pay a small extra amount to cover expenses. This was strengthened by the Marketing Department which used lorries to directly buy from the producer and ensure that the produce is available at a reasonable price at Marketing Department outlets in urban areas.

The extent to which the present government is guilty of allowing exploitation of the people is evident by the fact that the farmers are being forced to bring their produce to the traders, instead of the traders going to the farmers as in the past. As a result the farmer has to bear the cost of transport and has to sell his produce at any price that the trader is prepared to pay. If the trader so wishes he can refuse to buy, and the farmer has to throw away his produce and go back empty handed. This is a cruel practice that should not be permitted by any self respecting government. I and the LSSP strongly condemn this situation and demand that it should be terminated forthwith.