Rice prices vs. rice miller issues – Battling the big players

  • Small and medium rice mills facing closure
  • Requests price control for paddy purchases

By Sarah Hannan

Small and medium-scale rice mill owners have expressed their concerns over paddy purchasing prices and the controlled price of rice imposed by the Government. They point out that it is impossible for them to sell rice at the Government-stipulated price due to huge production costs they incur with the increase in paddy prices requested by large-scale rice mill owners.

Speaking about the rice crisis, All Ceylon Essential Food Stocks and Retailers’ Association Chairman Bandula Jayamanne said that the rice crisis was aggravated following a special gazette issued by the Consumer Affairs Authority (CAA) to regulate prices, pointing out that large-scale rice mill owners are purchasing paddy whilst being harvested in their respective areas. As a result, large-scale rice mill owners have enough paddy stocks all year round. The first harvest in any season is harvested in the Narammala, Polgahawela area, with the second harvest taking place in the Kurunegala side. The third harvest comes from Thoppur, Muttur, followed by the harvests from Anuradhapura, Polonnaruwa, Medirigiriya, and Mahaweli.

“There is something wrong with the Government’s paddy purchasing system. The Government starts buying paddy when the harvesting season begins in the Mahaweli Zone. By that time, two and a half months of paddy cultivation in other parts of the country has come to an end. A farmer in Kurunegala can never sell paddy at a higher price. Large-scale rice mill owners purchase paddy at cheaper rates. When the Government starts buying paddy, it is already too late,” Jayamanne explained.

The price of paddy has gone up to Rs. 50; while small and medium-scale rice mill owners are buying paddy at high prices, the large-scale rice mill owners have purchased paddy in bulk from other parts of the country at low prices. The Government should understand this situation. Jayamanne added that this situation has prompted the closure of many small and medium rice mills.

If paddy was purchased at government prices, there would be no such problems, Singha Rice Mills (Polonnaruwa) Owner Suraj Jayawickrama said.

“The paddy harvest has not been reduced due to rains, droughts, and pests during the Maha Season. The problem is that a kilogramme of raw paddy was bought at Rs. 44 and a kilogramme of dry paddy was bought at Rs. 50 by the Sri Lanka Army through government agents, who were asked to store paddy stocks at small and medium-sized rice mills,” he said.

Upping purchase prices

The large-scale rice mill owners, fearing that they will not have sufficient paddy stocks to purchase, decided to increase the prices of paddy. They announced that a kilogramme of paddy will be priced at Rs. 55-56, blocking the Government’s efforts in stocking and purchasing paddy stocks from farmers at Rs. 50. At that time, small and medium-scale rice mill owners were only able to store up to 50,000 kg of paddy, Jayawickrama elaborated.

They (large-scale rice mill owners) challenged the Government and increased the prices of paddy to an unaffordable price. Today, they are unable to sell rice at government prices. When the paddy is purchased at Rs. 55-56, it is not possible to sell rice at Rs. 90. If the small and medium-scale paddy mill owners are provided with paddy, there will be no such problems. As much as they challenged the Government then, the large-scale rice mill owners should take responsibility to provide rice at the Government-stipulated prices.

Jayawickrama is of the view that it is insensitive to increase the rice prices at this time as the general public is already facing financial difficulties due to loss of jobs. The mill owners should also stop pretending that there is a rice shortage.

Profiteering mill owners

“What happened to the paddy stocks they purchased at the beginning of the year? Did they just vanish? Large-scale rice mill owners have stockpiled paddy under different names. Every day large-scale rice mill owners make unlimited profits. Keeri samba is still making a lot of profit. It is the responsibility and duty of the Government to provide the rice at a stipulated price. It is the Government that has granted large-scale loans to paddy mill owners,” Kaudulla, Polonnaruwa farmer leader K. Jayathissa said.

Jayatissa was among several other farmers who launched a fast unto death demanding justice for their paddy harvest in August 2000 in Polonnaruwa. He was hospitalised when his health conditions deteriorated. Even after 20 years since that protest, farmers like Jayatissa seem to be constantly battling to receive a fair price for their hard labour.

While the farmers are driven to the point of taking their lives since they are burdened with debt, the rice mill owners seem to be making millions of rupees in profits by selling the rice that is milled out of the paddy which is bought at a lower price.

At the end of the Yala Season, in about one and a half months, there will be a supply of paddy stocks. The Government, realising that there would be a possible imbalance in the country’s food supply due to the Covid-19 lockdown, arranged for additional land to be repurposed for cultivation. This means the farmers will cultivate more paddy lands for which they would need extra fertiliser. Until this stock arrives, there is sufficient paddy stored to produce rice stocks for the next six weeks.

Harvesting of paddy for the 2019/2020 Mas Season began in late March. It was done throughout April and in early-May. The agricultural authorities said that the country had a harvest of 300 million metric tonnes of paddy this season. Hence, there is no chance of a shortage of rice. According to the Central Bank of Sri Lanka’s 2019 Central Bank Report, the total yield of paddy harvest in the country for the year 2019 is over 40 million metric tonnes. Therefore, it is unlikely that the country could suffer a shortage of rice in such a short period of time.

The Government has increased the guaranteed price of paddy to Rs. 50 per kilogramme in order to meet the supposed food shortage and provide a good market for paddy farmers’ harvest during the Mas Season. With the help of the Paddy Marketing Board, the Army was deployed to go and buy the paddy. They had bought 25,000 metric tonnes of paddy and it was also said to be sufficient for a period of nine months. The farmers also commended the Government for this.

Selling rice at a loss

The mill owners argue that they cannot sell rice at the controlled price by purchasing paddy at Rs. 50. It is well known that to produce a kilogramme of rice, one and a half kilogrammes of paddy are required. In addition, transportation, shorting, hires, operating and maintenance costs, taxes, manufacturer profits, and trade commissions too need to be added under the production cost. It is only after calculating these costs that the price of rice can be determined. Should the rice mill owner sell a kilogramme of rice at Rs. 85-90, they will incur losses.

“The guaranteed price system will not come into play when the harvesting begins. It takes a while. In the meantime, large-scale rice mills have already visited many farms and purchased paddy at lower rates. People like us have little chance. There is no shortage of paddy in the country. Large-scale paddy millers and large-scale paddy collectors have already stockpiled the paddy in the country. These stockades sell a kilogramme of paddy at Rs. 56. If we buy them, and by the time it reaches the mill, the cost of it becomes Rs. 59. So, we are to incur a loss if we are to sell rice at controlled prices,” All Ceylon Small and Medium-Scale Rice Mill Owners’ Association President B.K. Ranjith said.

Like rice traders, large-scale rice mill owners are trading on a profit basis. If selling rice at the controlled price is unprofitable, and if the retailers are being raided by the CAA continuously for selling rice at higher prices, the small and medium rice mill owners have no choice but to shut down their rice mills.