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Getting closer to the masses


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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?


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