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No forex for rice imports

22 Jan 2022

By Maheesha Mudugamuwa The opening of the rice market for importers in a bid to bring down the continuously rising rice prices in the market seems to be another unsuccessful attempt by the Government, with the Treasury last week stating that its foreign currency account had already dried up. The Treasury is neither expecting an inflow of a large amount of foreign funds at present nor earnings to cover the country’s import demand. It is only left with a small fund from China that could be utilised for Chinese rice imports, The Sunday Morning learns. Treasury Deputy Secretary R.M.P. Rathnayake told The Sunday Morning last Thursday (20) that the Treasury had no money left and discussions were ongoing in relation to importing rice from China. However, he did not disclose details of the discussions. Rathnayake stressed that other than from China, no funds were expected for importing rice. He however said that the situation was expected to improve within the next few months as tourism recovers and asserted that priority would be given to importing essentials. Artificial shortage? Meanwhile, farmer organisations and consumer rights activists claim the shortage has been artificially created by mill owners and are urging the Government to take action to bring down prices. All Ceylon Farmers’ Federation (ACFF) President Namal Karunaratne said the ongoing shortage was artificially created as crop depletion due to the fertiliser shortage could not have had any effect on current rice stocks. Karunaratne said the country’s rice demand per year was only around 2.4 million MT and to fulfil that demand the country needed a total of 3.6 million MT of paddy and another one million MT as seed paddy per year. “Taking into consideration the yield from 2019 till 2021, there should be a stock of nearly 2.7 million MT at present with mill owners,” he said, adding that the ongoing fake shortage could only be tackled by the Government – not by importing but by taking necessary policy decisions.  According to Karunaratne, the decision to import rice is a band-aid solution. The ACFF President stressed that rice prices would escalate further unless brought under control now. “The farmers are expecting a loss of nearly 50% of production due to the lack of fertiliser this year; we could only harvest around three million MT in the Maha season this year and in the Yala also farmers expect a severe reduction.” Local rice prices began to escalate last December. According to Central Bank of Sri Lanka (CBSL) statistics, prices of samba, nadu, kekulu (white), and kekulu (red) last Wednesday (19) at Marandagahamula were Rs. 165, Rs. 163, Rs. 155, and Rs. 158 respectively. In 2021, the prices stood at Rs. 130, Rs. 99, Rs. 97, and Rs. 99, while in 2020 they were Rs. 96, Rs. 94. Rs. 96, and Rs. 96 for the same rice varieties on the same day. Price control attempts fail As observed by The Sunday Morning, almost all attempts by the Government to control rice prices during the last year in the local market have been unsuccessful. Such attempts include the Government’s new price control mechanism which was announced mid-2021. Unsurprisingly, consumers alleged that rice stocks were not available at the controlled price, leading to a shortage. To end the shortage of essential foods, President Gotabaya Rajapaksa declared Emergency regulations with effect from midnight on 30 August 2021, following which the Essential Food Commission (EFC) as well as the Consumer Affairs Authority (CAA) began to raid unregistered rice stores to ensure ample stocks were received by the market. Nevertheless, the EFC was not effective as mill owners declared their prices at a joint press conference and set the price of a kilogramme of nadu at Rs. 115 against the Government-declared controlled price of Rs. 90. Rice imports Meanwhile, the Cabinet has approved the importation of 200,000 MT of nadu and 100,000 MT of samba. The Government has also signed an agreement with the Burmese Government for another 100,000 MT of raw rice, expected to arrive next month. It is also learnt that Finance Minister Basil Rajapaksa and the CBSL have been consulted on importing rice through the private sector. Memoranda of Understanding (MoUs) have also been signed and Letters of Credit (LCs) issued to import nadu and super samba from India and raw rice from Burma. According to CBSL statistics, the country imported the largest rice stocks of 748,000 MT at a cost of $ 301 million in the decade spanning 2011-2020. Meanwhile, Trade Minister Bandula Gunawardana said the Government would grant permission to local importers to also import rice as the Treasury had reduced the tax on rice to 25 cents from Rs. 5 per kilo. This is aimed at setting up an additional stock of 500,000 MT of imported rice via the State Trading Corporation (STC) in order to maintain the price of rice at Rs. 105 per kilo. Statistics show that the total paddy production of the country is at 36,000,000 MT per year while the total rice production is at around 24,000,000 MT per year. During the Yala season alone, farmers produce around 30,000,000-35,000,000 MT of paddy and during Maha season the production is around 45,000,000 MT. Price hikes for commodities Other than rice, prices of other essential food items such as vegetables and fruits have also recorded a spike recently. The hikes have been caused by the shortage of vegetables due to the ongoing fertiliser issue. High vegetable prices have resulted in stocks not moving as expected and even storing the remaining stock in cool rooms has not been helpful, the ACFF President alleged. Speaking to The Sunday Morning, National Movement for the Protection of Consumer Rights (NMPCR) Chairman Ranjith Vithanage urged the Government to intervene and take immediate action to bring down prices as consumers could no longer bear the cost of living. “We purchased rice a few years ago at Rs. 70 or Rs. 80 and now we have to purchase it at Rs. 165 or more. Consumers can’t afford these prices and importing is not the solution. The Government should get involved immediately and force mill owners to bring down the prices,” he stressed. Meanwhile Agriculture Minister Mahindananda Aluthgamage told Parliament last Friday (21) that the country had enough stocks of paddy for six months. He said that as per his observations, the expected harvest drop this Maha season would only be around 20-30%. Aluthgamage further assured that the Government would take the responsibility for crop reduction and compensate farmers accordingly. He also said it would take a critical decision on the paddy purchasing price next week considering crop loss.  


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