Building a competitive agriculture sector

Self-sufficiency in rice is the highly romanticised historical and cultural ethos that has driven Sri Lanka’s agricultural policy for the past ninety years. It was indeed a noble goal at the time of independence, when the country was producing only around 40% of its rice domestically for a population less than half the size it is today. Many massive irrigation schemes and billions of dollars in subsidies later, Sri Lanka has achieved a rice surplus. Yet this has also brought other problems. A heavily subsidised and uncompetitive agricultural sector has left both farmers and consumers at a disadvantage. An agricultural sector that depends heavily on subsidies and state intervention cannot be considered truly successful if it imposes a growing burden on the rest of the economy.

Farmers receive assistance through fertiliser and seed subsidies, machinery programs, subsidised credit, crop insurance and smallholder development schemes. Fertiliser support alone is substantial, with nearly Rs. 40 billion reportedly spent during the 2025/26 Maha season. Irrigation water is also frequently provided free of charge or below cost through massive irrigation projects costing hundreds of billions of rupees.

Subsidies have helped generate periods of surplus production, yet farmers remain dissatisfied with the government-guaranteed prices they receive. At the same time, consumers often face high food prices because imports are restricted and local farmers have little incentive to produce more efficiently in an environment where competition is limited. The state can therefore find itself supporting production while simultaneously having to intervene in the market to manage the consequences. That is hardly a model of efficiency.

More fundamentally, subsidised production does not necessarily make Sri Lankan agriculture competitive internationally. Farmers accustomed to guaranteed prices, subsidised inputs and other forms of protection have less incentive to experiment with higher-value crops, adopt new technologies, improve productivity or respond to changing global demand. Meanwhile, Sri Lanka competes with countries where agriculture operates on a much larger commercial scale and where producers are constantly under pressure to reduce costs and improve quality.

There are environmental costs as well. An excessive concentration on a single crop can encourage intensive cultivation and reduce incentives for crop rotation and soil recovery. Long-term agricultural policy cannot be judged simply by the number of tonnes harvested in a single season. Soil health, water use, productivity and the value generated per acre must also be taken into account.

The country should therefore move gradually from a subsidy-driven agricultural model towards a more competitive one. This does not mean abandoning farmers or withdrawing support overnight. Nor does it mean sacrificing food security. It means changing what the government chooses to support.

Public money would be better directed towards agricultural research, extension services, irrigation efficiency, rural roads, storage, technology, market information and temporary assistance during genuine shocks, rather than permanently subsidising production.

Rice should remain an important crop, but it should not be treated as an economic objective that overrides every other consideration. Sri Lanka should ask a more practical question as to which crops our farmers can produce efficiently, profitably and sustainably, both for domestic consumers and for international markets.

There may be short-term pain in making this transition. Some farmers will need help to switch crops, adopt new methods or move away from activities that are no longer economically viable. But protecting an inefficient system indefinitely merely postpones the adjustment while increasing its eventual cost.

The agriculture sector needs to stand on its own two feet. The ultimate measure of success should not be how much the government spends to keep farmers producing, but whether farmers can earn sustainable incomes by producing what consumers are willing to buy at competitive prices. That is the path towards an agricultural sector that strengthens, rather than burdens, the wider Sri Lankan economy.