ECONOMYNEXT – Sri Lanka has sought a million tonnes of rice as a gift from China government ministers says which is expected to make good an expected crop loss from during the main Maha cultivation season from a chemical fertilizer ban.
Sri Lanka had sought the million tonnes of rice as a gift as a way mark a 30 year long barter agreement between the People’s Republic and Ceylon which ran from 1953 to 1982.
Trade Minister Bandula Gunewardena said the donation was sought during an virtual meeting with the Chinese ambassador to Colombo with the 30 years being market on December 18, 2022.
“The response was very positive from China,” Minister Gunewardene told state-run ITN television.
“What we asked was for a gift of one million metric ton of rice as paying respect for the 3 decade agreement that went on without changing under various governments.”
A million tonnes of rice is worth between 350 to 500 million dollars at current market price for Indica rice grades.
Sri Lanka’s main Maha cultivation season that end around March produces about 2.5 million metric tonnes of paddy (rough rice) and up to 3 million tonnes in good years.
About 1.9 million tonnes of milled rice is produced from a good season, which is enough for over 9 months of use at around 195,000 metric tonnes a month. Output can fall to around one 1.5 million tonnes in drought years.
A million tonne gift from China will make good a crop loss of up to 50 percent. Sri Lanka’s cabinet of ministers also relaxed import controls to allow 300,000 metric tonnes of rice from India.
Finance Minister Rajapaksa said in January the government will buy paddy at 75 rupees a kilo to make good a 30 percent crop loss as part of 220 billion rupee ‘relief package’.
Sri Lanka’s farmgate price for rice was around 50 to 60 rupees. But millers said it had risen to around 95 rupees at the beginning of the current harvest season which is just beginning. Farmers are also complaining of steep harvest losses.
President Rajapaksa said this week that the government will also give 95 rupees for a kilo of rough rice.
Sri Lanka retail rice prices for milled rice now range around 130 to 150 rupees, depending on the grade.
“We need to understand that if we buy one kg per 50 rupees, then the price of it in the market will be 100 rupees,” Minister Gunewardene said.
“If we bought it for 75 rupees the market price will be 150 rupees. By saying we need to strengthen the farmers and get rice at 200 rupees per one kg the price of it in the market will be 400 rupees.
Sri Lanka had earlier banned the import of rice to keep domestic prices high and also give profits to rice millers. Attempts to bring price controls failed and created shortages.
In an improvement of policy the government has ended price controls.
“Rice mills owners said they will bring one kg price to 300 rupees,” Minister Gunewardene said.
“At that moment I told the president and the cabinet that we will not let one kg of Samba to go above 130 rupees, nadu we will try to give below 100 rupees or under 105 rupees.”
Sri Lanka’s consumer prices surged to 12.1 percent in the 12-month ending December 2021, after two years of money printing and exchange rate trouble. The central bank on Tuesday raised interest rates by 50 basis points. (Colombo/Jan21/2021)