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Wednesday December 7th, 2022

Sri Lanka Agripreneurs’ Forum recommends 10 proposals to improve access to food

ECONOMYNEXT – The Sri Lanka Agripreneurs’ Forum (SLAF) has recommended to Agriculture Minister Mahinda Amaraweera a 10-point proposal to improve access to food amid the country’s worst currency crisis in decades.

The collapsing currency has pushed up the price of foods by close to 100 percent over two year with salaries not keeping up pace, making it difficult for the less affluent in particular to afford basic carbohydrates and more affluent people being deprived of access to protein.

In Sri Lanka it typically takes about two years to recover from a currency crisis and real salaries to recover somewhat, analysts say.

Sri Lanka has not fully emerged from the currency crises with money still being printed in smaller volumes and a surrender requirement in place, which also creates money and alters rupee reserves of individual banks helping maintain forex shortages.

The forex shortages as well as central bank trade restrictions make it difficult to import some foods and agricultural inputs.

At a meeting held with the minister and other stakeholders on September 06, the SLAF said in a statement that it had recommended, among other measures, issuing fuel to farmers under a prioritised quota system, lifting the TT limit of USD 50,000 for agri input imports up to USD 100,000, and allowing and facilitating hybrid maize seed imports.

The SLAF noted that Sri Lanka’s shortages in inorganic fertilizer, organic fertilizer, agro chemicals, vegetable seeds and other inputs in the 2021/2022 Maha and 2022 Yala cultivation seasons made a considerable impact on food production and may have a greater impact even in coming Maha season of 2022/20223 due to shortage of fuel, forex and all agri inputs amid the less than ideal economic situation in the country.

This is the largest contraction in the agricultural economy recorded since 2015 and if the problems are not addressed by the authorities immediately, the food crisis situation could be worse during the early part of 2023, the organisation had told the ministry officials at the discussion.

The full statement is as follows:

SLAF is the single professional agri-entrepreneurial organization that represents approximately 30% of the country’s workforce. Addressing the need of the hour, SLAF recognized the dire need to positively intervene in the current food crisis in Sri Lanka and thus met with the Hon. Minister of Agriculture Mahinda Amaraweera on 30th August 2022 at the Ministry of Agriculture, Battaramulla to discuss sustainable solutions. Following this, a meeting was arranged, facilitated by SLAF, on 6th September 2022 with the participation of the heads of respective state agencies such as the Ministry of Agriculture, Colombo Municipal Council, Sri Lanka Standards Institution, National Fertilizer Secretariat, and Institute of Postharvest Technology. Heads of the private sector were also present at the meeting such as Hayleys, Lankem, CIC, Unipower, CropLife, and Baurs. The discussion was led by key Executive Council members of the SLAF bringing in a 10-point proposal to the table.

SLAF pointed out that the shortage of Inorganic fertilizer, Organic fertilizer, Agro Chemicals, Vegetable seeds, and most of the other Agri inputs in the last Maha (21/22) and Yala 2022 made a considerable impact on the food production of the country and it may have a greater impact even in coming Maha season 22/23 due to shortage of fuel, forex, all Agri inputs and the less than ideal economic situation in the country. It was highlighted to the minister that this is the largest contraction in the agricultural economy recorded since 2015 and pointed out that if the problems are not addressed by the authorities immediately, the food crisis situation could be worse during the early part of 2023.

SLAF listed the key limitations the country is facing now, because of the economic crisis in the country and strongly recommended the way forward given below to achieve food availability (mainly, locally grown) accessibility while being affordable to ensure the sustenance of the nation.

The specific issues along with the solutions include,

1. Shortage of fuel and current power cuts –

This has a direct impact on cultivation-focused activities and transportation of harvest to the markets. As a result, at least 30% of Paddy & Vegetable farmers have kept away from cultivation and this attitude will be continued even for Maha season 22/23 if immediate solutions are not given. This situation also applies to the livestock sector quite severely.

To address this issue Diesel, Petrol, and Kerosene oil should be given to farmers under a prioritized quota system to operate agri machinery and other modes of transportation (tractors, water pumps weeding & harvesting machines, and lorries and trucks) through a permit system introduced by AGAS of the area.

2. Restrictions on ‘FOREX’ approvals given by Central Bank to commercial banks to import a total range of Agri inputs –

As a result, a shortage of imported hybrid seeds, synthetic fertilizers, and other Agri inputs has occurred. Imported seeds available in the market are only 10% of the national requirement and we have further noticed a severe shortage of local seed varieties. Due to shortages of major Agri inputs, such as seeds, fertilizers, agrochemicals, Agri machinery, and overall inputs,  approximately 30% of disappointed farmers are keeping away from cultivations. 30 – 40% drop in yield in cultivated lands is not supporting the current situation positively.

As a solution, SLAF proposed to lift the TT limit of USD 50,000 for the importation of Agri inputs, up to USD 100,000 at least until 31.03.2022. It was also recommended that the Central Bank give directions to Commercial Banks to treat Agri input imports such as fertilizer, agrochemicals, and seeds as essential imports when issuing letters of credit (LCs) or TT payments.

3. Impact on the Livestock sector –

The livestock industry has been affected badly due to almost ‘0’ production of ‘Maize’ required for animal feed production. Maize seed imports have come to a halt due to the non-availability of FOREX. The limited acreage cultivated cannot contribute sufficiently to achieve the expected Maize harvest due to the non-availability of synthetic fertilizers and agrochemicals and it was noticed that yield dropped by 50%-60%. As a result,  consumers have to pay today Rs.1300.00 per Kg for chicken and the price of an egg is in the range of Rs.50.00 – 60.00. Similarly, the price of liquid milk too has gone up drastically. Apart from the affordability, the availability of these products is becoming irregular.

SLAF recommended allowing hybrid Maize seed imports and providing required forex for the seed industry to address this issue. It was also suggested to encourage farmers to grow ‘Maize’ in the coming Maha season and the Government should offer incentives for Maize farmers based on their yields.  It was recommended to ban the import of Maize for the animal feed industry as means of saving FOREX, subject to the expected yield of Maha cultivation. SLAF also highlighted that the recent proposal to register Maize cultivating farmers should also have a follow-up to support their cultivation with necessary inputs and assured markets and prices.

4. Identify the values and benefits of the second and third-generation plant nutrients –

According to National Fertilizer Secretariat (NFS) records, Sri Lanka imports 750,000 – 800,000 MT of chemical fertilizers spending almost USD $ 400 Mn per annum. This volume includes approximately 300,000 MT of Urea and it has only a single nutrient component, that is Nitrogen.  Recently, the price of 01 MT Urea went up to USD $ 1100 in April 2022 and today it is in the range of USD 500-700 per  MT in the international market. Even if we take the average price of USD 800 per MT, Sri Lanka must forecast to spend USD $240 Mn only for the import of Urea for the Maha season. According to the International & Local Research Institutions, 65%-70% of the nutrient value is lost and wasted when applying Urea to a crop. In Sri Lanka, Urea is mainly used for Paddy cultivation in the early stages.

As a solution, SLAF recommended the government should give due recommendations to NPK + TE (trace elements) mixed compound fertilizers with advanced fertilizers as it reduces the wastage while also reducing the amount of required fertilizer by 40% – 50%.

SLAF further recommends introducing ‘Hybrid fertilizers’  produced with 60% Chemical and 40%  Organic fertilizers with different NPK ratios based on crop requirements. SLAF also urged the authorities to encourage farmers to use slow-release and controlled-release fertilizers for their inherent benefits.. It was highlighted that the government should not consider giving fertilizers under the subsidy schemes anymore and should discourage using Urea for other field crops. SLAF pointed out that the proposal by the Minster that 30% organic fertilizer should be used for the next Maha season needs to be formalized and followed up with the supply of commercially certified organic fertilizers being registered and made known. The administrative mechanisms to ensure the achievement of this goal should be in place without delay.

5. Lack of focus on the plantation and export agriculture sector –

Records indicated that the production and export of Tea have come down drastically. Export earnings from Tea exports only record USD 1.9 Bn in 2018/2019 and the values have come down in 2021/2022 to approximately 1.2 Bn mainly due to the ban of Weedicides and the non-availability of chemical fertilizers. The same facts are applying to other export agriculture crops such as cinnamon, pepper, spices & betel, etc.

SLAF recommended allowing the import of weedicides such as ‘Glyphosate’ even in limited quantities and making available forex to import proper fertilizer mixtures of all export-oriented crops including plantation crops. It was suggested to encourage farmers to produce export-oriented crops and offer them incentives based on their contribution to harvest. Introducing the use of Biofertilizers and Biopesticides to gain recognition in the international market for Organic produce and support local producers of such products. It was pointed out to ensure the necessary regulations and administrative procedures to recognize the optimal products and aggressively support the development of such products.

SLAF remarked that Improving value addition on product quality and post-harvest processing technology targeting the high-value export markets is another timely requirement of the Sri Lankan agricultural sector to earn better export earnings.

The discussion with the respective stakeholders saw the concerns of both the private and public sectors being brought to light and the respective authorities being tasked with implementing the solutions which were agreed upon.

The SLAF strongly believes that a pragmatic approach to revolutionizing the Sri Lankan agricultural sector is crucial to uplift the current status of the country and its people. Thus, it is firmly agreed to bring about this change by being a key facilitator in coordinating between the government sector, private sector, and individual farmers. SLAF identifies that this is only possible through genuine commitment and devotion to the well-being of the country and its people.

SLAF calls upon dedicated individuals and companies/institutions to support the cause of the SLAF and to provide their support on creating a better nation through the improvement of agriculture. Contact us via our email at secretariat@agripreneur.lk  to extend your willingness to contribute and be a part of the SLAF membership.

Finally, the SLAF takes this opportunity to call on the authorities to implement the proactive measures provided by the state and private sectors and to continue working towards the good and well-being of the people of this country to ensure a better tomorrow for all of us. (Colombo/Sep23/2022)

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  1. Ananda Jayasinghe says:

    The recommendation on using NPK+TE is conceptually and technically wrong because it may lead to blanket recommendations irrespective of locational differences such as soil and agro-ecological factors. That alone will lead to heavy fertilizer losses . Also, P and K and TEs are not required at all time of the crop growth. And further, crops other than rice also needs nutrients. This recommendation discriminates between crops.

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  1. Ananda Jayasinghe says:

    The recommendation on using NPK+TE is conceptually and technically wrong because it may lead to blanket recommendations irrespective of locational differences such as soil and agro-ecological factors. That alone will lead to heavy fertilizer losses . Also, P and K and TEs are not required at all time of the crop growth. And further, crops other than rice also needs nutrients. This recommendation discriminates between crops.

Despite losses, Sri Lanka to resume “park & ride” transport after complaints  

ECONOMYNEXT –  Sri Lanka’s state-run Transport Board will resume its loss-making City Bus service from January 15, 2022 Cabinet Spokesman Bandula Gunawardena said, after the service abruptly discontinued with the state-run firm’s director board citing losses.

The City Bus service was introduced in 2021, under the government of former President Gotabaya Rajapaksa, from Makubura to Pettah and Bambalapitiya.

The service was started to reduce the number of automobiles travelling to and from Colombo and suburbs by providing a comfortable, convenient and safe public bus transportation for passengers and riders who use cars and motorcycles as their means of transportation.

During the time period in which the service was initiated, there were 800 hundred vehicles that would be parked and would use the system, Gunawardena, who is also the Transport Minister, said.

The service was later collapsed due to inconsistencies in scheduling and it was completely stopped after

“Without informing the Secretary or the Minister of the relevant Ministry, the Board of Directors have come to a conclusion that this is loss making route and must be halted,” Gunawardena said.

“The users of the City Bus service brought to our notice and therefore I gave the Secretary to the Ministry of Transport the approval to start the City Bus service from January 15.”

“If we stop all loss making transport services then massive inconveniences will occur to the people in far parts of the island.”

The chairman of the state run Ceylon Transport Board has been asked to handover the resignation letter by the Minister Gunawardana citing that the head has failed to implement a policy decision approved by the government. (Colombo/ Dec 06/2022)

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Sri Lanka may see rates falling next year: President

ECONOMYNEXT – Sri Lanka’s interest rates are high and hurting small businesses in particular but interest rates are required to maintain stability, President Ranil Wickremesinghe said.

“One is, all of you want to know what’s going to happen to the interest rates?,” President Wickremesinghe told an economic policy forum organized by the Ceylon Chamber of Commerce.

“I wish I know. The governor has told me that the inflation has peaked. It’s coming down. You all understandably want some relief with the interest rates to carry business on.”

“I understand that and appreciate the viewpoint. It’s not easy to carry business on with such high interest rates. On the other hand, the Central Bank also has to handle the economy. So maybe sometimes early next year we will have a meeting of minds of both these propositions.”

Sri Lanka’s interest rates are currently at around 30 percent but not because the central bank is keeping it up. The central bank’s overnight policy rate is only 15.5 percent but the requirement to finance the budget deficit and roll over debt is keeping rates up.

Rates are also high due to a flaw in the International Monetary Fund’s debt workout framework where there is no early clarity on a whether or not domestic debt will be re-structured.

After previous currency crises, rates come down after an IMF deal is approved and foreign loans resume and confidence in the currency is re-stabilished following a float.

This time however there has been no clear float, though the external sector is largely stable and foreign funding is delayed until a debt re-structure deal is made.

Sri Lanka’s external troubles usually come because the bureaucrats do not believe market rates are correct when credit demand picks up and mis-uses monetary tools given in 1950 by the parliament to suppress rates, blowing the balance of payments apart.

The result of suppressed rates by the central bank are steep spikes in rates to stop the resulting currency crisis.

A reserve collecting central bank has little or no leeway to control interest rates (monetary policy independence) without creating external troubles, which is generally expressed as the ‘impossible trinity of monetary policy objectives’.

However, it has not prevented officials from trying repeatedly to suppress rates, perhaps expecting different results.

After suppressed rates – supposedly to help businesses – trigger currency crises, the normalization combined with a currency collapse leads to impoverishment of the population.

The impoverishment through depreciation leads to a consumption shock, which also leads to revenue losses in businesses.

The suppressed rates then lead to bad loans.

In the 2020/2022 currency crisis the sovereign default has also led to more problems at banks. Several state enterprises also cannot pay back loans.

“…[T]he bad debt that is being carried by the banks is mainly from the private sector or the government sector,” President Wickremesinghe said.

“Keep the government sector aside. We’re dealing with it. How do you handle it? Look, one of our major areas of are the small and medium industries. You can’t allow them to collapse, but they’re in a bad way.”

Classical economists and analysts have called for new laws to block the ability to central bank to suppress rates in the first place so that currency crises and depreciation does not take place in the first place.

Then politicians like Wickremesinghe do not have to take drastic and unpopular measures to fix crises and there will be stability like in East Asia.

Sri Lanka had stability until 1950 when the central bank was created by abolishing an East Asia style currency board. The currency board kept the country relatively stable through two World Wars and a Great Depression.

In 1948 after the war (WWII) was over “we stood second to Japan” Wickremesinghe said.

“But we started destroying it from the sixties and the seventies,” he said. :We started rebuilding an economy, which was affected by a (civil) war, and thereafter the way we went, is best not described here.”

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Crisis-hit Sri Lanka sees recovery in cruise ship tourism from zero

ECONOMYNEXT – Seventeen cruise ships are scheduled to arrive in Sri Lanka next year with
Queen Mary 2, one of the largest and popular ships, Colombo’s harbor master said, as the island nation is looking for alternative avenues to boost its faltered tourism sector.

The rise is expected to bring thousands of high end tourists with higher spending capacity after two years. The island nation saw a record high 54 ships in 2019, rising from the previous year’s 42, Nimal Silva, Colombo Port Harbor Master said.

“The 2019 was one of the best years and in 2020 there were more than 60 scheduled vessels to
call but with COVID pandemic all hell broke loose,” Silva told EconomyNext.

Fourteen cruise ships are scheduled to call from January-May next year and another three are scheduled to arrive in Colombo in November, when the peak tourism season begins.

Cruise tourism cycle begins in Sri Lanka from October to May with a dip during the monsoon
seasons.

Sri Lanka welcomed two cruise ships in November after almost two years.

Three ships are scheduled to arrive in December and Azamara Quest, carrying at least 722 tourists, arrived in Colombo on December 3 and is now heading to Hambantota.

On December 18, Le Champion carrying 264 will arrive in Colombo and depart to Mumbai and the third vessel, Silver Spirit will arrive in Colombo on December 23 carrying up to 648 passengers.

There are two scheduled in January, one in February, and four in March next year, according to the harbormaster.

“Next year more ships could schedule, so far these are the confirmed ones now,” he said.

This also generates income for the port and the prices are charged according to the size of the
vessel.

Silva said the first medium sized-cruise vessel, 229 meters long, generated about 14,000 dollars
for docking in the port for a day.

He said Queen Mary 2, a 325 meter long ship and one of the largest cruise ships in the world, is also
scheduled to call at Colombo in February. It can carry up to 3200 passengers.

Silva said almost all the ships that were scheduled have arrived on the island and therefore, he is
confident all the ships including Queen Mary 2 will arrive in Sri Lanka.

“Only one ship has been canceled thus far. There are no last minute cancellations if there were some they would have informed us by now,” Silva said. (Colombo/Dec07/2022)

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