Govt. calls for EOIs to build, operate 5 rice mills

• Mills to be set up in Ampara, Anuradhapura, Batticaloa, Hambantota and Kurunegala
• Minimum investment to be Rs. 500 m
• Output to be sold via Sathosa and cooperative societies in next Maha season
• Govt. ensures maximum 6% return after a grace period of 3 years

By Charumini de Silva

In a fresh move aimed at addressing stock shortages and price hikes, the Government has called for Expressions of Interest (EOIs) from investors keen on constructing and operating new paddy mills.

The initiative is a result of the Cabinet decision taken in August to build five rice mills in the Kurunegala, Anuradhapura, Batticaloa, Hambantota and Ampara districts under a public-private partnership (PPP) and distribute the essential commodity via Lanka Sathosa and cooperative societies from the next Maha season.

As per the Cooperative Services, Marketing Development and Consumer Protection State Ministry, the interested parties should be able to invest a minimum of Rs. 500 million and must comply with the Government policies and regulation. Those who currently own rice mills will not be considered in the new initiative.

However, the investor should have no legal impediments to sign agreements and must give consent to establish a special purpose vehicle (SPV), a new company, cooperative society, joint venture or institution to construct and operate the mill. 

The Government will also permit the investors to make direct purchases from the Paddy Marketing Board (PMB) at a guaranteed price, provide paddy storage facilities to a certain extent, allow importation of machinery and equipment duty-free, and ensure a maximum 6% return after a grace period of three years.

The potential investors or the business partners will also be facilitated to sell rice through the State-run Lanka Sathosa or Co-operative Society retail network.

“The rice production was well above demand, but it was sold at unusual and exorbitant prices, further burdening the general public. We hope the establishment of the mills will address the artificially created exorbitant prices by traders and to protect consumers,” Co-operative Services, Marketing Development and Consumer Protection State Minister Lasantha Alagiyawanna told the Daily FT.

The annual rice consumption is around 2.2 million tons and the paddy harvest for the 2020/2021 Maha season and the 2021 Yala season is around 4.8 million. The collective production of rice is about 3.2 million tons. However, rice prices have been soaring for many months in the local market.

To counter possible shortages and maintain buffer stock, the Cabinet of Ministers in September decided to import another 100,000 tons of rice from India and Thailand under a Government-to-Government (G2G) agreement as per a proposal by Trade Minister Bandula Gunawardena.

In August, the Government decided to import 6,000 tons of rice through the Sri Lanka-Pakistan Free Trade Agreement (FTA) as a short-term measure to address the shortage of rice in the market. Previously in June, the Cabinet decided to import 100,000 tons of Samba under the G2G deal.

State Minister Alagiyawanna assured that the importation of rice would not impact paddy prices in the upcoming Maha season and that the Government would intervene if needed.

“Paddy prices will not go down. If the paddy mill owners try to buy paddy at a lower price, then the Paddy Marketing Board will purchase stocks at the Government guaranteed price,” he said.

However, prices quoted by the private mill owners are much higher than the Government guaranteed price for paddy kilo, which is at Rs. 50 (Nadu), Rs.52 (Samba) and Rs. 55 (Keeri Samba).