Seeking to create more demand for paddy, the Government has removed a gazette that previously prohibited rice from being used for products other than human consumption.
Announcing the move, President Anura Kumara Dissanayake said that Sri Lanka’s improved rice production made it possible to expand into industries such as animal feed, brewing, and food manufacturing, creating more buyers for paddy and offering farmers better prices.
According to Central Bank data, paddy production for the 2025/’26 Maha season, based on the sown extent as of end March 2026, is forecast at 2.82 million MT, reflecting a 2.7% increase from the previous Maha season.
While the Government notes that expanding the use of rice will help address market challenges stemming from surplus production and create new market opportunities for farmers, there are also concerns raised regarding food security, buffer stocks, and the long-term management of the country’s paddy sector.
Speaking to The Sunday Morning Business, stakeholders shared differing perspectives on what this initiative could mean for farmers, consumers, and Sri Lanka’s value-added industries.
Govt. stance
Commenting on the decision to permit rice to be used for products beyond direct human consumption, Deputy Minister of Agriculture and Livestock Namal Karunaratne noted that Sri Lanka was currently recording one of its largest-ever paddy harvests, with paddy yields increasing significantly in recent cultivation seasons.
He said that this increase was acknowledged not only by farming organisations but also by millers’ associations, while statistical data collected by the relevant department and reports submitted by agricultural officers also confirmed the increase in paddy production.
In this context, Karunaratne noted that the country now faced the challenge of managing surplus production. He explained that limiting the use of rice only to direct consumption was no longer practical under such circumstances.
Accordingly, he said the restrictions and laws that had previously been in place regarding the use of paddy had been temporarily lifted, allowing paddy and rice to be utilised in products such as animal feed, beer, and other rice-based byproducts.
“This directly addresses the major market issue that has developed. By expanding the use of paddy, demand has risen. When demand increases, the market issue gets resolved. From the perspective of farmers, this helps them manage their market effectively.”
The Deputy Minister further noted that the Government had already commenced purchasing paddy at Rs. 120, Rs. 130, and Rs. 140, with nadu, samba, and keeri samba being purchased under the programme. He added that the private sector was also purchasing paddy at the same rates. The Government has also allocated Rs. 10 billion in credit facilities to the private sector to facilitate paddy purchases, allowing both the public and private sectors to jointly address issues faced by farmers.
He added that farmers had therefore been encouraged to sell their paddy when they had requested the Government to purchase stocks, noting that a solution had now been provided to address farmers’ market-related concerns.
Speaking on opportunities for value addition, Karunaratne noted that rice could be used in a range of products, including biscuits and as a substitute for wheat flour in certain food products. However, he noted that the necessary space must first be created for such industries to develop.
“We must create the necessary space for it. Only then can we reap those benefits with our own unique identity. There are no obstacles to that. The Ministry of Agriculture has the capability to coordinate with the farming community to produce the required amount of paddy for these purposes,” he said.
Responding to whether there were plans to expand paddy cultivation to support such industries, Karunaratne said that the Government did not intend to increase the physical land area allocated for paddy cultivation. Instead, efforts are focused on increasing productivity from existing agricultural lands, and the Deputy Minister said that this move had demonstrated positive results.
Industry consumption matters
Meanwhile, University of Peradeniya (UOP) Faculty of Agriculture Department of Crop Science Senior Professor Buddhi Marambe pointed out that although legislation had restricted the use of rice for purposes other than human consumption, rice had nevertheless been utilised in several industries for many years. However, because its use had been prohibited under existing legislation, such utilisation had never been formally recognised or recorded.
He explained that in 2020, the Government had decided that locally manufactured rice should not be used for anything other than direct human consumption. This restriction was subsequently expanded to include imported rice as well. Prior to that, laws regarding the use of rice had similarly limited its utilisation beyond human consumption.
Prof. Marambe observed that discussions regarding rice availability had at times been based on exaggerated figures because a portion of the country’s rice production had already been directed towards animal consumption and other industries. He added that there were several industries emerging that utilised rice in different forms.
“I have also previously advocated that when rice is available in adequate quantities, it should be permitted to be utilised for purposes other than direct human consumption. If rice can be put to good use, then it should be used. In more than one way, it is actually product diversification. Thus, the move is good, but it has to be considered very carefully. If we have adequate rice to consume, this decision is good. But if we run short of rice, then it is essential to be extremely careful once again,” he noted.
While supporting the move in principle, Prof. Marambe repeatedly highlighted that its implementation must be carefully monitored. He noted that allowing rice to be utilised in multiple industries without appropriate oversight could create challenges should domestic supplies become inadequate.
The implications of the policy are not limited to rice production alone and are closely associated with Sri Lanka’s maize industry as well. Sri Lanka’s annual national requirement of locally produced maize is around 600,000 MT, although the country falls short of supply consistently, having to permit maize imports throughout the years.
Prof. Marambe also noted that maize production had fallen short of domestic requirements, with local production accounting for less than 50% of national demand in several years. Although production increased to around 50% of requirements last year, substantial quantities still need to be imported. He further noted that approximately 85% of maize produced in Sri Lanka was utilised for animal feed production, while around 95% of that amount was used in poultry feed.
“There is a maize industry in Sri Lanka and thus it is important to strike a balance in the field at present. Careful monitoring is the requirement,” he stressed.
According to Prof. Marambe, if rice prices decline sufficiently, feed manufacturers may find rice to be a more affordable alternative compared to other inputs currently available in the market. This could create new opportunities for the animal feed industry, although it would also have implications for maize farmers and feed manufacturers that policymakers would need to consider.
He noted that rice and maize should not be viewed as entirely separate commodities in this context, as both markets were interconnected through their use in animal feed production.
Responding to the opportunities that value addition could create from an agribusiness perspective, Prof. Marambe observed that previous restrictions had discouraged industries from openly acknowledging their use of rice because doing so could have resulted in legal consequences. He suggested that officially permitting the use of rice in such industries could provide the Government with more realistic and accurate information regarding the country’s rice consumption patterns.
Accordingly, understanding precisely which industries utilise rice, whether in the form of broken rice or whole grain, will make it easier to determine actual domestic availability and compare it against national consumption requirements, which will be valuable for future policymaking. However, Prof. Marambe reiterated that permitting the use of rice across industries should not be interpreted as allowing unrestricted utilisation without oversight.
“It is necessary to monitor the situation, since we are looking at the maize farming population, the rice farming population, and the consumer. Rice remains Sri Lanka’s staple cereal, while maize plays an important role in meeting the country’s animal protein requirements through poultry production,” he noted.
Interlinked industries and value addition opportunities
Moreover, analysts note that in order to make a definitive assessment of the policy, proper economic modelling and conclusions based on future projections along with a broader understanding of its impact on Sri Lanka’s farming sector are required. This also includes challenges in attracting or retaining young people in farming due to lack of sufficient value or commercial returns and the need to make farming more profitable.
While enabling alternative marketing opportunities for farmers would lead to increased demand, the decision has to be viewed alongside the stance on food security and rice imports as well.
Meanwhile, commenting on the removal of restrictions on the use of rice, UOP Faculty of Agriculture Senior Professor of Agricultural Economics Prof. J. Weerahewa similarly noted that while the previous regulation had prohibited rice from being used for purposes other than human consumption, including animal feed and alcoholic beverages, such practices had continued unofficially as they were commercially viable.
Using the poultry industry as an example, given that Sri Lanka did not produce enough maize to meet the sector’s requirements, she explained that maize imports remained subject to licensing requirements and import taxes, making the input expensive. Since broken rice is a close substitute for maize in poultry feed, restricting its use can contribute to increased production costs.
“Broken rice can easily be used in the poultry industry for the production of poultry feed, but it is not allowed. That makes poultry feed prices high, which in turn makes chicken and egg prices high. This deprives local consumers of lower prices and also deprives exporters of the opportunity to be competitive in the world market,” she said.
Prof. Weerahewa further noted that Sri Lanka’s poultry production systems were comparable with leading international standards and that the country’s bird flu-free status created opportunities to expand exports. However, she said that high feed costs limited the industry’s competitiveness.
“Thus, restrictions such as this prevent poultry producers from capturing international markets. If rice can officially be used for poultry feed and other value-added products, it would certainly help. It creates opportunities for rice farmers, benefits producers, and also helps consumers. The same applies to alcoholic beverages such as beer, where rice can be used profitably.”
Farmers’ views
Offering a different perspective, National Agrarian Unity Chairman Anuradha Tennakoon questioned whether directing rice towards products such as beer, animal feed, and biscuits would ultimately benefit farmers, adding that food security considerations must remain a priority.
While noting that the Government had stated that the decision had been a result of surplus production, Tennakoon rejected the argument that releasing surplus stocks was necessary to enable the Government to purchase farmers’ paddy.
Instead, he asserted that the priority should instead be maintaining an adequate buffer stock as part of the country’s food security framework. According to international standards, he stated that countries were expected to maintain a food security reserve equivalent to approximately 5% of protected food stocks.
Tennakoon added that Sri Lanka’s annual rice requirement was approximately 2.45 million MT, which required between 3.7 million MT and 3.8 million MT of paddy. Based on these figures, he claimed that the country recorded a surplus of nearly 1 million MT of paddy almost every year. He further noted that after maintaining adequate food reserves, surplus rice and paddy could be directed towards exports, particularly to markets in the Middle East.
He also questioned the economic viability of directing paddy towards these products.
“If we are to release paddy for animal feed, and if the Government is buying the paddy, we would have to sell the paddy for animal feed at about one-third of the current market value. This is because animal feed does not rely solely on paddy. The same goes for beer production. Even if beer is produced in our country, it is not made from rice. Beer production involves hops and similar ingredients.”
He added that such laws and regulations should not be disregarded at a State level, expressing his opposition to the move. At the same time, he acknowledged that industries such as animal feed production required grains, including maize and other inputs.
Tennakoon also raised misgivings regarding food security in the context of climate developments, noting that there were growing concerns internationally about a possible food crisis and the effects of climatic events such as El Niño.
He added that failing to manage the current situation appropriately could create challenges during future cultivation seasons.
“If farmers cannot sell their paddy in the upcoming season due to the lack of proper pricing and a fair guaranteed price, they will distance themselves from paddy farming. They will reach a point where they only cultivate enough for their own consumption,” he said.
Discussing current market conditions, Tennakoon noted that rice prices remained subject to the price control gazette introduced in 2024. He pointed out that the controlled retail prices were approximately Rs. 220 per kilo for nadu, Rs. 240 for samba, and Rs. 260 for keeri samba.
He added that increases in paddy prices did not necessarily justify increases in rice prices because farmers themselves were producing the paddy. He further stated that paddy had previously been purchased at comparatively lower prices while retail rice prices had remained unchanged.
Tennakoon also observed that keeri samba was not generally available in the market at its controlled price and was commonly sold at around Rs. 360 per kilo. According to him, large-scale millers are the primary producers and suppliers of keeri samba, contributing to distortions within the market. He opined that attempts to address pricing concerns by importing lower-priced rice could have serious implications for domestic producers.