- Treasury shouldering billions in legacy debt
- Treasury repayments on pre-2024 PMB loans resume
- Audit flags millions in interest and late-payment costs
- PMB says no losses incurred under current administration
- Millers offered up to Rs. 25 m interest-free funding
The Government has launched a new interest-free financing scheme for the 2026 Yala paddy procurement programme. This, as audit findings reveal that delays in settling previous loans obtained for paddy purchases have resulted in hundreds of millions of rupees in additional interest and late-payment charges, while the Treasury continues to shoulder billions of rupees in legacy debt.
The Ministry of Finance, Planning, and Economic Development has launched the rapid paddy procurement programme for the 2026 Yala season with the stated objective of securing fair prices for farmers while ensuring that rice reaches consumers at affordable prices.
Under the new programme, registered small and medium-scale paddy mill owners and cooperative societies operating mills with a maximum daily capacity of 25 MT will be eligible for interest-free concessionary funding of up to Rs. 25 million each.
The scheme comes against the backdrop of audit findings highlighting significant financial costs arising from previous paddy procurement financing arrangements.
According to the audit findings, Rs. 1 billion was obtained from People’s Bank on 28 January 2020 and a further Rs. 840 million on 4 March 2020 for paddy purchases during the 2019/’20 Maha season, backed by a Treasury guarantee and carrying an interest rate of 11%.
The loans were originally to be settled in 36 monthly instalments. However, following delays in repayments, the repayment period was extended by another 15 instalments to 51 months. Bank confirmations cited by the audit showed that, as of 31 October 2025, Rs. 539.77 million had been paid as interest and Rs. 5.42 million as late fees, while a further Rs. 508.14 million remained payable.
The audit also highlighted a Rs. 6.5 billion loan obtained from the Bank of Ceylon in 11 instalments between 1 February and 11 March 2022 for purchasing paddy during the 2021/’22 Maha season.
Although the loan was to be repaid within six monthly instalments, the full amount was only settled on 25 January 2025, more than 34 months later.
According to the audit, had the loan been settled within the stipulated period, the interest payable would have amounted to approximately Rs. 49.15 million. However, by the time it was fully repaid, Rs. 272.14 million had been incurred as interest and another Rs. 13.85 million as late fees.
The audit therefore calculated an additional cost of approximately Rs. 236.84 million due to the failure to settle the loan by the due date.
The findings further revealed a substantial longer-term burden arising from pledged loans obtained from the Bank of Ceylon and People’s Bank between 2012 and 2019 for paddy procurement.
As the Paddy Marketing Board (PMB) was unable to repay these loans, the Treasury had converted them into term loans, with repayments scheduled to continue until 2028.
According to the audit, the Treasury had paid approximately Rs. 12.46 billion to the two banks on behalf of the board between 2020 and April 2025. A further Rs. 8.44 billion was expected to be payable from May 2025 through 2028, comprising approximately Rs. 7.11 billion in principal and Rs. 1.33 billion in interest.
The audit recommended that loans obtained for paddy procurement be efficiently utilised for their intended purposes and repaid according to schedule.
Against this backdrop, the new 2026 Yala programme will involve small- and medium-scale millers and cooperative societies in purchasing paddy at Government-guaranteed prices.
When contacted by The Sunday Morning, PMB Chairman Manjula Pinnalanda said that the Treasury had already resumed repayments of loans obtained prior to 2024. He attributed the losses incurred under previous paddy procurement programmes to Government policy decisions that had resulted in paddy being procured at higher prices and the resulting rice being sold at lower prices.
“Due to a Government policy decision, paddy procured at a higher rate was resold at a lower rate, and as a result, a huge loss was incurred. However, since the loans were obtained from banks, they have to be repaid,” Pinnalanda said.
Asked whether the PMB had incurred any losses under the current administration, Pinnalanda stated that it had not done so thus far. “So far, we have not incurred losses. We also launched a new programme on Friday,” he said.
Red and white nadu paddy will be purchased at Rs. 120 per kg, while samba paddy will be purchased at Rs. 130 per kg.
Unlike the previous bank-financed arrangements highlighted in the audit, eligible participants under the new scheme will receive interest-free concessionary funds of up to Rs. 25 million.
Paddy purchased using the funds must be processed and the resulting rice sold within a maximum of 240 days from the date the funds are received. The full proceeds must subsequently be repaid to the project, without interest, commission, or other charges.
The programme, which commenced on 12 August, will be implemented through district secretaries and the Department of Agrarian Development with the support of the Ministry of Agriculture, Livestock, Land, and Irrigation, while the Finance Ministry will oversee its implementation.
Eligible mill owners and cooperative societies have been requested to register with their respective district secretariats to participate in the programme.