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A right Royal debacle – Part 2


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(Part 1 of this article can be read here)

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 optimize 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 on why the initiative of co-operation 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 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,

1. The current practice of using gunny bags for transporting vegetables

2.Use of baskets to transport vegetables

3.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

4.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 & 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.

 

Innovation, research and development

The new organisations will adopt a 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 a 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 its eyes and see the plight of farmers. Like the birds being freed from a 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 the 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 meeting chaired by the Minister for Food Security on 16 January was one good example. Viewers heard firsthand how officials in various sectors under the ministry spoke of the misdeeds of the past and how B-onions, in millions of kilos, perished in the warehouses.

Corrupt officials and the middlemen will never allow the Government to implement food security under the present structure. Indeed, on the following day, the minister informed the IGP to seal a warehouse of CWE in Colombo pending investigations.

By empowering the farmers in all sectors of agriculture, the Government will be easily able to implement the food security plans. A satisfied society of farmers who are the primary producers and that of the end consumers will mean great harmony and peace to all. That peace will lead to ultimate prosperity for all in our motherland.

Indeed, in the Paththakamma Sutra, the Enlightened One extolled the lay people to do the five giving or Pancha Bali. One of which is Athithi Bali or doing service to others and caring for those who seek help/service (It may be noted that long before the marketers coined the phrase ‘Customer Relationship Management (CRM)’, Lord Buddha had spoken of the virtue of service).

(The writer can be reached at sugathra@airindia.indusky.lk or Sugath_ras@sltnet.lk)


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