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Getting closer to the masses

Wednesday, 11 April 2018


Prime Minister Ranil Wickremesinghe after defeating the No-Confidence Motion
against him by the Joint Opposition first paid homage to the Triple Gem at
Gangaramaya Temple and later addressed the media. He said that the foremost
thing now for the Government was to get closer to the people.

In the past two-and-a-half years there were initiatives like giving free laptop
computers and tabs and creating more infrastructure support for IT with WIFI
connectivity, which has not gone well for Government given the resounding
response of the masses during the recent council elections. So how can the
Government get closer to the people?

The population of nearly 21 million people in our nation can be divided into 30%
and 100%. This may sound rather silly because if there is one 30% then the
balance is 70%. But the 30% here are the farmers who make our food to keep our
stomachs full and the 100% all of us who are consumers in some form or other.
This Government has two-a-and-half years’ time to make the 30% farmers happy
and with that a happy nation, how?

Without our farmers we will have to starve. We can walk without motorised
transport, wear basic clothing and have simple abodes, but cannot do without
food. We cannot have a 25% full tummy because it will scream all the time. In the
Ariyawansa Sutra, the four basic needs given are clothing, food, abode and
meditation.

On one early morning the Enlightened One surveying the world with compassion
observed that a certain village farmer had the merits to attain Stream-Entry
(Sothapaththi). The Buddha went to that village and the villagers offered alms to
Buddha. The farmer woke early in the morning and finding that his herd of cattle
was not in the cattle shed, went into the jungle looking for them. Despite looking
for them for hours and not finding the cattle, he decided to come to the place
where the Buddha was and sat in a far corner to listen to Dhamma. However, the
Buddha told a Bhikku to give the farmer some food as it was of no purpose to
teach Dhamma to a person with an empty stomach.

In the next two-and-a-half years, the Government can not only moot this change
in the prosperity of farmers but the prosperity of the nation as a whole and
assure itself victory again in the next elections as a happy farming community and
consumers not burdened by the middlemen who manipulate farm gate and
consumer prices will fall behind those who brought happiness and prosperity to
them.

Situation analysis
The global escalation of commodity prices in the latter part of last decade
impacted Sri Lanka’s rice market, with retail prices showing sharp increases for
the consumer. The regulatory forces with ceiling on consumer prices and
guaranteed price for paddy did alleviate this problem to some extent. The long
drought and the subsequent floods impacted paddy cultivation. This also
highlights the need to augment the water retaining capacity of lakes by de-silting
the lakes so that more rain water could be retained. Despite various plans to
even export rice, the farmers who are the primary producers are not able to get
even the guaranteed price for their paddy.

In the vegetable sector too problems are brewing with farmers not being able to
sell their produce even at rock bottom prices and having to dump truckloads of
vegetables in garbage dumps. On the other side consumers are forced to dish out
more and more money for the daily essentials.

Nature too has not been kind to us. In early 2014 we experienced drought
conditions in paddy and vegetable growing areas with tanks drying up. This was
followed immediately afterwards by incessant rains, which caused heavy floods
and wiped out a huge quantity of paddy which was held in storage with the
farmers. Then in 2017 came the drought again in the cultivation areas.

Indeed, in 2015 a local TV channel in their evening news gave an insight into how
officials are flouting the guaranteed price, in this case for onions, with the
connivance of certain unscrupulous traders depriving the farmer of his just
income. In late 2014 the potato farmers went up in arms in Welimada. TV footage
showed how angry farmers thronged the premises of authorities demanding a
better price for their produce. The drought in 2017 dealt a severe blow to paddy
and vegetable production as well as coconut cultivation.

We have this happening time and time again, one day it is the tomato famer, then
next the potato farmer and so on. But the problem becomes very acute due to
absence of a food security policy and empowering the farmer to own the value
chain of rice and vegetables from farm gate to consumer. Thus it is evident that
Sri Lanka is in need of a mechanism to develop the market for agricultural
products in a sustainable manner, free from the clutches of officials and
politicians.

Underpinning the failings of these sectors are a range of issues emanating from
the limitation on storage for paddy procured at guaranteed price, a sustainable
return for the farmers and the inefficiencies and inequalities in the current
system. Thus the future calls for a process from the field to the plate on the table
where the influencers and the beneficiaries are the actual stakeholders.

Strategic analysis of the problem therefore needs to look at both the current
situation as well as look to the best international practices in order to devise a
new and better strategic direction for the future.
The proposed solution is no stranger to this country. Multinational companies
which are engaged in paddy cultivation in Sri Lanka already practice these
strategies from cultivation to processing, packaging, branding and marketing the
branded end product. The farmers of this nation who are citizens surely must
have a better say than the foreign multinational companies. Similar strategies can
be implemented in the vegetable and other perishable sectors. It only sets out to
contribute to a paradigm shift in the thinking and policy development in the
agricultural sector.

Rice farming in context


Nearly 30% of the population of Sri Lanka are involved in farming with the
majority of these engaged in rice farming. The farming community in the country
is primarily from the poorer segment of the society. As an economically
disadvantaged group, they lack effective organisation, leadership skills and
representation at a political level. Lack of strength and effective voice means the
community is dependent on the others, many of whom have different agendas
and interests.

With an economy so dependent on the rice crop, to ignore the needs for proper,
fair and equitable support and policies for the farming community is to endanger
the very stability of society and adding further trouble to an already economically
challenged country. What is needed is a bottom-up approach to planning rather
than the traditional incumbent of a top-down system. This is true of the sector
irrespective of the geographical location within the country. Leadership from
within needs to be developed, coerced and encouraged.

Sri Lanka’s rice sector SWOT analysis

Strengths
Availability of land
Farming knowledge
Ability to work long hours
Simplicity of lifestyle
Weaknesses

No access to low cost finances


Lack of good storage facilities
Lack of financial power to hold paddy for long periods
Limited influence in their own affairs
Often in debt and under obligation to the private paddy buyer
No say in end consumer price

Proxy producer for middle man

Opportunities

Innovate and organise to capture more of the value chain


Build influence in the paddy chain
Ensure right price for their paddy
Profit from any variation in the price of rice
Build financial strength
Ensure steady income even after having sold the paddy stocks
Uplift living standards
Overall increase in the purchasing power of farmers which is a benefit for other
goods and services sectors
Create a viable, sustainable and profitable industry
Attract those who are presently in marginal employ or under employed
Build and sustain marketing and distribution process
Establish a pension or provident fund scheme paid for from the profits
Dividends
Earn foreign exchange
Threats

Mega rice and vegetable industry middlemen


Power of the existing mega brands
Administration conditioned to present system
Import of agricultural products
Reluctance of younger generation to consider farming as a worthwhile career due
to poor returns
Sri Lanka’s rice

sector – Development goals


Goal: Achieve independence, acquire authority and influence in the production
and processing of paddy and marketing, distribution and revenue optimisation of
rice and rice products.

Assumptions
Adequate funds will be available at low interest rates from multilateral or other
lending agencies
Shares of industry co-ops or of the public companies restricted to actual rice
farmers only
Private sector style management
Overall objective: Develop industry co-ops or public companies where the
ownership is by the farmer at regional levels based on growing areas. Such
structures will manage the affairs of purchasing, processing and marketing
bringing a ROI to all stakeholders. It will benefit the government too by enabling
the sector to become self-reliant and increasing the attractiveness of farming. In a
wider sphere it will contribute to national growth and better wealth distribution.

Strategy options

for the sector


Acceptance on the fundamentals of becoming organised and creating a co-
operative/public company structure by the farming community. This will
necessitate developing leadership and support for the organisations
Educating and creating awareness among the rice farmer why he/she should take
charge of the rice chain
Creation of the optimal legal structure to ensure key ownership and benefit of the
rice trade remains with the farming community
Financial support initially based on non-commercial or subsidised terms from
those multilateral lending agencies who claim that their desire is to uplift the poor
masses in developing countries
Take and develop ownership of milling, storing, packaging facilities, and perhaps
also the ownership of logistics.
Develop branding, distribution and marketing, through own outlets, other
wholesalers/retailer and supermarket chains.
Development of effective payment mechanisms.
Adopting leading edge information and communication technology (ICT) solutions
to support effective overall management practices.
Gradual and systematic upgrading of quality, varieties and volume of rice of rice
produced with export markets in vision
Development of supplementary crops and land use to optimise use of marginal
lands not suitable for rice for other crops such as vegetables etc.
Driving the agenda
The starting point will be creating and nominating central organising committees
based on growing areas/regions with representation from across the rice farming
community of those areas/regions in the country. The members of these
committees will be tasked with educating and creating awareness among the rice
farmer why the initiative of cooperation and asserting ownership makes sense.
This will include;

Secure necessary funding to establish and organise


Defining the optimal legal structure
Defining the requirements and benefits of owning the value chain
Develop audio visual programs explaining the merits of this model, the benefits
and what it will do for their living standards.
Train resource personnel to educate, communicate and get buy-in from the
farmers
Demarcate the main rice growing areas on a set of principles
Define the current sector in a research based study across the country
Creating support

Present the business case to the multi-lateral donors. The stated mission and
objectives of bodies such as World Bank too states that they are there to help
people help themselves. The WB Mission Statement states, “WB group aims to
fight poverty with passion and professionalism for lasting results – to help people
help themselves and their environments by producing resources, sharing
knowledge, building capacity, and forging partnerships in the public and private
sector.” Also the newly-established BRICS Development Bank objective is to
provide development funding in BRICS group and developing nations.
Quantification of the current production volumes based on the growing regions
for assessments of the desired critical mass for the creation of the units and
necessary structures
Agree upon the financing modalities
Work with the organisations in building food security plans
Use of funds

State-of-the-art milling facilities based on density of growing, ease of access,


transport facilities, etc. Consideration must be given to the present millers and
how they could compliment the process
Proper own storing facilities such as silos for storage of paddy and rice as well as
vegetables and fruits
Packaging facilities enabling creation of own brand/s
Transport and other logistics support, both own and ability to secure third party
services at competitive rates.
Distribution and marketing

Branding of rice products


Develop other rice based products such as rice flour, breakfast cereals, rice flour-
based products
Research on product development such as rice flour bread, biscuits, etc.
Pricing and Revenue Management strategies
Develop own retail/wholesale outlets
Promote to optimise use of rice and rice-based products
Transportation strategy
In the vegetable sector, it is a well-known fact that due to crude packaging and
transport strategies large quantities of vegetables perish. In 2013 the previous
Government tried to bring in a policy of packing in baskets when transporting as
opposed to gunny bags with disastrous results. The failure of the initiative was
solely due to the inability of authorities to understand the principle of the rights
of the people and absence of choice. What the then Trade Ministry people should
have done was to give a choice and leave the transporter to decide based on
mutual benefits.

With the farmer community being in charge of the whole sector as opposed to
middlemen and to increase the yield in the utilisation of vegetables it is proposed
that a twofold approach be adopted namely:

The current practice of using gunny bags for transporting vegetables.


Use of baskets to transport vegetables.
Those transporters who select the option of baskets to be provided with baskets
at a concessional price, facilities to transport the empty boxes back to base by rail
at a very nominal rate, reduction in the annual revenue license fee and
concessions in import duty when importing new trucks.
Those who opt to use the old gunny bag model of transportation will not receive
duty concessions for new truck imports.
Revenue

management in rice
The fundamental in revenue management of perishable assets is the revenue
opportunity cost of the next unit of inventory or EMR (Expected Marginal
Revenue). EMR is the probability of selling the next unit of inventory. If the
probability is low, then the end consumer price too will be low. In the rice market,
with bumper harvests there will inevitably be pressure on the end consumer price
of rice. While the consumer is benefited, the drawback will be the downward
pressure on the price of paddy at the farm gate which will eventually result in
cutback in the farming acreage in the next season.Unlike in the case of fixed
inventory capacity such as airlines, hotels, cruise liners where the inventory
subordinate table is built taking into account the market segmentation for
optimisation of revenue (unless utilised at the time of departure or on the day of
occupation the inventory will perish) the same cannot be applied in the case of
commodities such as rice or vegetables where the marginal unit could determine
the price if overproduced.

Therefore, strategic plans need to be in place to ensure there is optimal


production with the farmer obtaining a better price, without exploiting the
consumer. Some of the strategies could be

Based on research findings work out the acreage to be farmed for local
consumption
Incremental acreage to be farmed with high value varieties with local discerning
upmarket segments and export markets in view
Product development, rice flour, rice breakfast cereals, rice sweets, rice based
bread, rice based noodles etc. Product differentiation and creating new products
to existing markets as well as new markets will enable to increase the EMR of the
marginal unit
Undertake research to develop new products with both local market and export
markets in view
The need for inter-regional competition to ensure that while the farmer enjoys
the benefits, that the consumer too is not disadvantaged and has choice of quality
and price in which to choose from
Proper storage facilities where rice, onions, vegetables will not perish as now.
Developing an

optimal income
management process
This will likely be a combination of guaranteed prices for products supplied plus
distribution of dividends at agreed intervals throughout the year. Within the
structure, the new organisations may decide to set aside funds annually to
establish and create an effective pension fund/EPF for the members. Over time,
the financial strength of the organisation should be such that it will be in position
to provide financing to the members on preferential terms to that of banks and
current financial businesses.

Further after a tax holiday period, the organisations could be taxed on their
profits generating income to the government.

Developing an Information and Communication Technology Strategy – ICT

There is need for the organisations to develop rice and other allied products
commerce data. The new organisations may wish to consider making use of
already existing resources within the community or develop their own resource
centres for upkeep of all data;

Computer resource centres to create and maintain all commerce data


Maintain all production, consumption, export data and build database which
could be used to forecast future consumption patterns and use that data to plan
growing rice, other allied products, new product development, etc.
Develop marketing data with consumer segmentation, consumer needs and
wants, etc.
(The writer can be reached via Sugath_ras@sltnet.lk.)
Innovation, Research

and Development
The new organisations will adopt gradual and systematic process of implementing
research and acquiring new knowledge to upgrade the rice crop in respect of
quality, varieties and volumes. This will include;

Optimisation of production from existing acreage


New land cultivation
New varieties including those with export potential as well as varieties capable of
increasing yield. Importance should be given to the growing of our traditional
varieties of rice which are far more beneficial in terms of health and more
resistant to insects than the hybrid paddy.
Optimising land use by utilising marginal lands and extending the activities of the
new organisations to non-rice areas.
Source markets local and international and develop new products.
There are number of other areas where the new organisations can play an
important role. This could include provision of farming experts to help increase
production in underperforming regions and ensuring effective water
management.

The activities of the new organisations could well develop to buying beyond the
production of its members. Further the organisations will need to have the
infrastructure in place to deal with disputes, issues and problems within the
farming community and its members.

Further after an initial gestation period the organisations could be quoted in the
stock exchange with members being allowed to sell a certain percentage of their
shares in the exchange.
Let the whole nation open eyes and see the plight of the farmers. Like the birds
being freed from the net, let us free the farmers from the net of poverty,
unhappiness and debt so that they reach the destination of peace and happiness
because their happiness will be the nation’s happiness.

Food security
All agricultural strategies in all sectors will have little impact if focus is not
directed to food security. In the developed world food security is part of the
national agenda. Japan is a good example where due to influence of the rice
farmer, rice imports are banned except in processed forms. Rice production is
also subsidised by the Government which aggravated trade friction between
Japan and USA. The Japanese position is that self-sufficiency in rice production is
important for food security.

The EU is another good example of how food security is seen by the community.
In fact, all developed nations have food security at the highest importance in
national development. By building economic strength of the farming community,
Sri Lanka can create food security and ensure that the fleecing of the consumer by
the middlemen will not take place.

The Prime Minister now has the power and the support to bring this change for
the farmers and consumers benefit, and what better time than now?
Posted by Thavam

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