Sri Lanka currently operates 14 of its 18 established Dedicated Economic Centres (DECs). These centres were initially set up to provide essential market infrastructure for the sale, purchase, storage, and distribution of agricultural products.
Recently, Minister of Trade, Commerce, Food Security, and Cooperative Development Wasantha Samarasinghe noted in Parliament that all economic centres had, regrettably, failed to achieve their intended objectives. He revealed that a Cabinet paper had been submitted proposing reforms to their management.
Consequently, the Cabinet has approved the creation of a limited liability company to oversee the development, expansion, and comprehensive management of Sri Lanka’s specialised economic centres.
The management of these DECs is presently carried out by a management trust, which consists of ex officio members appointed by State institutions and trade associations, operating under the chairmanship of the district secretary of the respective district.
Centralised management, streamlined operations
Speaking to The Sunday Morning, Deputy Minister of Trade, Commerce, and Food Security R.M. Jayawardana revealed that the plan was to incorporate all 18 DECs across Sri Lanka under a single company.
He confirmed that the legislative documents for this initiative had already been prepared. The intention is to establish a separate board of directors for this new entity, which will be responsible for executing the programme.
Additionally, a separate manager will be appointed for each individual centre, and these managers will function under the guidance of this common board of directors.
According to the Deputy Minister, every economic centre currently operates under a separate governing body and the rental revenue generated from their stores does not reach the Government; instead, it is circulated internally within those individual centres.
“We believe this needs to be changed. A state of monopoly can also be observed within certain active economic centres, where operations disregard the common objectives. The ideal objective of economic centres is to benefit farmers by providing them with the necessary resources and to facilitate the movement of produce to intermediate businessmen,” he noted.
However, he stated that currently there was no tangible benefit to the farmer, and customers often had to pay up to three times the initial price when purchasing produce. Hence, he noted that the economic centres had failed to achieve this fundamental objective.
Jayawardana also explained that in order to address these issues and reduce the cost of living, the plan was to formalise the process of purchasing from farmers or direct suppliers.
The currently established system involves produce being brought to the economic centre by the farmer, then moving to a wholesaler, subsequently being transported to Colombo by another trader, and finally reaching the retail trader through yet another intermediary.
“There are three intermediate traders involved in this current process of reaching the end customer. Our plan is to reduce these three to two, which would thereby minimise the loss of produce. If not, the end customer has to bear the cost of stock loss, as well as the excess profit taken by the intermediate traders involved.”
Moreover, Jayawardana also noted that the Government hoped to utilise the railway system, specifically through the Thambuttegama DEC, to transport vegetables as far as Matara. For this purpose, there is a plan to use a 10-acre land situated close to the Thambuttegama Railway Station to establish a storage facility. Through this, the ministry hopes to minimise or prevent intermediate loss of stock, thereby removing a significant disadvantage to the customer.
Furthermore, he noted that the ministry was also hoping to improve the interconnection between farmers and wholesalers by including farmers in a cooperative society system for production.
Jayawardana explained that when purchases were made from farmers individually, there could be disadvantages for both the farmer and the customer. Hence, there will be a programme to purchase farmers’ produce through cooperative or Sathosa systems and then distribute it via the economic centres.
Economic perspective on issues and reforms
Speaking to The Sunday Morning on economic centre development, University of Peradeniya (UOP) Department of Economics and Statistics Prof. M.B. Ranathilaka, who specialises in agricultural economics, highlighted the presence of a large number of middlemen as one major issue in several economic centres, which drove up costs significantly.
He also added that the stores in certain centres, while under Government ownership, were rented to one party, but then subsequently re-rented multiple times to other parties, thereby driving up instalment costs. He also observed that at times, wholesalers and middlemen manipulated the market and the farmers’ produce to their own benefit.
Commenting on the Government’s plan to change the management system of the economic centres, Prof. Ranathilaka noted that while it was a positive notion, the careful selection of suitable board members remained a major concern. Accordingly, he noted that if implemented effectively, the situation could be significantly improved.
“The main objective of the DECs is to provide a reasonable price to both consumers and producers. However, unfortunately, this objective is largely not achieved. There are comparatively better economic centres, while some have many issues.
“Hence, a degree of Government intervention is necessary to reestablish these systems with proper regulation, in order to provide proper benefits to both consumers and producers,” he pointed out.
Prof. Ranathilaka highlighted that over the years, the gap between Sri Lanka’s farmgate, wholesale, and retail prices had been substantially and continuously widening, particularly from the 1980s to 2013.
He noted that the reason for this was the increasing participation of middlemen who retained higher profits, a trend that had also been growing over the years. Prof. Ranathilaka also highlighted post-harvest losses, along with logistical and transport problems, as severe concerns within the economic centres, all of which impacted consumer prices.
Severe infrastructure issues
The Sunday Morning also spoke to several stakeholders within the DECs across the country regarding the limitations and issues recently highlighted by the Government.
Speaking to The Sunday Morning, former President of All Island Economic Centres and Manning Traders’ Association Aruna Shantha Hettiarachchi, who is at present an adviser to the association, stated that in the main economic centres, vegetables were brought in without prior orders the majority of the time, with the exception of Nuwara Eliya. He stated that this practice harmed farmers and did them an injustice.
He added that the price of produce already sold at the market, which was subsequently brought to the economic centre, could be lowered significantly. Furthermore, when produce is brought without orders, it often arrives in quantities far exceeding the required amount.
“Usually, when an economic centre is established, vegetables should ideally arrive only at the centre and prices should be controlled from there. However, this does not happen anymore. Even in Nuwara Eliya, other wholesalers operate in very close proximity, impacting sellers within the economic centres.”
Hettiarachchi also noted that sellers within the centres paid taxes, paid for their space, and employed many individuals, whereas those operating externally did not bear such commitments.
Addressing logistical concerns, he emphasised that economic centres should especially work to secure the quality of vegetables. He stated that it was important to once again spread awareness among farmers, encouraging them to follow quality assurance measures.
He also pointed out that several concerns arose from transport practices, since at times, even 10,000-12,000 kilos of produce were transported in lorries designed to carry only 5,000 kilos, leading to the destruction of approximately 30% of farmers’ produce and significantly impacting prices.
Commenting on the Government’s decisions regarding changes to the management structure, Hettiarachchi explained that every economic centre had its own management trust with a trust board, which dealt with issues and worked towards developing the centres.
He stated that all decisions were taken by this board, which included the district secretary, divisional secretary, municipal commissioner, Police SSP, and others. Hence, he stated that the trust board usually made fair decisions.
Concerns regarding proposed changes
Similarly, former President of the Keppetipola Economic Centre Trade Association S.A.R. Bandusena, currently an adviser to the association, noted that Keppetipola was among the best economic centres and had seen several significant development activities within it.
Commenting on the suggested changes, he noted that the practice followed so far had proven helpful, as activities were carried out based on the decisions of a management unit comprising all relevant stakeholders. He added that they were yet to be informed about the specific changes the Government would implement.
Bandusena expressed objections regarding the announcements made by the Government on changing the management system. He emphasised that the economic centre functioned mainly with the money it generated and was not dependent on Government revenue, with the exception of wages paid for officials. Other expenses and administration work are conducted using money generated from rent.
“We are cautious regarding the development focus, as the revenue generated, once collected by the Government, might not be specifically used to develop our particular economic centre. We are uncertain if it will be used to fulfil these needs,” he said.
Furthermore, he stated that this decision had been taken without consulting all economic centres.
Safeguarding farmers and consumers
The Manning Market, unlike the economic centres, operates with a separate structure. Manning Market and Joint Economic Centre Association Treasurer Nimal Attanayake noted that the practice of the Manning Market involved maintaining a direct relationship with farmers based on a commission system, without intermediary intervention.
He pointed to problems within the administrative system and infrastructure, noting that there were illegitimate traders who threatened the market of authorised, legitimate traders, although no steps had been taken to tackle these issues. He also highlighted higher rent and several infrastructure issues such as the lack of a post office, consistent cell reception, cool rooms, and a conveniently located bus stop, none of which had been addressed so far.
“Economic centres may have certain concerns in management. If farmers are heavily taxed in the markets, they face many issues and customers are required to pay more. Hence, there should be subsidy measures introduced to address their concerns. If a well-appointed official board and a set of strong regulations enabling a proper overview of the economic centres are established, then conditions would certainly improve,” he said.
Also commenting, former Secretary and current member of the Dambulla Economic Centre Trade Association I.G. Wijenanda noted that the centre strived its utmost to enable farmers to achieve good production without intermediary involvement, adding that the vegetables that arrived at the market were cultivated within Dambulla.
He highlighted that the processes of the economic centre were conducted under fair commission rates. Based on this system, if produce is sold for Rs. 800-1,200 per kilo, the commission rate is only Rs. 30, while many other economic centres charge 10%.
“The Dambulla Economic Centre receives a great deal of produce due to ensuring fair practices for farmers. From the farmer’s perspective, justice is done by the economic centre.
“There are, however, concerns regarding safeguarding the customer, as they may receive produce through separate traders and prices fluctuate. For the Government to protect the customer, there is a need to establish strong agricultural production within the country,” he said.
Wijenanda added that there was a need to improve agricultural production and highlighted substantial disparities in price fluctuations across different seasons. He emphasised that these systems required change to ensure fairness for both farmers and customers.
Moreover, while expressing hope regarding the proposed Government measures, he also pointed out the need for the Government and the relevant line ministries to consult and conduct discussions with those currently involved in the economic centres, especially those in Thambuttegama, Keppetipola, and Dambulla, as they traded directly with farmers and were therefore acutely aware of any concerns.