The President of Sri Lanka, Anura Kumara Dissanayake, recently engaged in a thoughtful conversation with a television channel. During the conversation, he shared insights on a significant idea that could impact the nation’s future.
One of the main topics Anura discussed in that conversation was the presence of a business mafia in Sri Lanka. He specifically provided a timely analysis of the rice mafia, which has left the people of Sri Lanka feeling extremely helpless.
Rice is the staple food of the people of Sri Lanka and is the most widely consumed food in the country. However, Sri Lankans often have to pay a high price for rice. This is mainly due to the fact that the sale of rice is controlled by a few companies, giving them significant power over pricing.
Leading the industry are two companies: Aralia Rice Company, owned by Dudley Sirisena, who is the brother of former Sri Lankan President Maithripala Sirisena, and Nipuna Rice Company. Both companies are owned by influential political figures.
As a result of this situation, the people of Sri Lanka experienced significant difficulties in purchasing rice. Additionally, the actions of these two companies undermined the fundamental economic principle of price determination based on supply and demand, turning it into a complete falsehood.
The reason for this situation is that two companies, along with several others, buy and store nearly all the rice produced in Sri Lanka. They purchase the rice and then sell it at higher prices, which prevents the price of rice in Sri Lanka from decreasing. As a result, the country has consistently faced a shortage of rice, even though the warehouses of these companies are filled with it.
The rice mafia has been operating in Sri Lanka for decades, and no government has been able to stop it. However, the new government, led by President Anura Kumara, has made it clear that it is committed to addressing this issue. This signals a hopeful change in the outlook of the new president.
Using public funds for rice production
Rice in Sri Lanka is entirely produced using rainwater. The country is dotted with thousands of tanks that store this rainwater throughout the year. Additionally, several reservoirs are being constructed and utilised as part of the Mahaweli movement.
Rice is grown using this water. Government funds are allocated for water and irrigation, and employees of those institutions receive salaries from public budgets. This represents a significant expenditure. However, several companies are responsible for harvesting paddy.
The government invests a considerable amount of financial resources to secure a reliable water supply for agricultural purposes. This crucial support not only aids in sustaining crop production but also reflects the government’s commitment to safeguarding the interests and well-being of farmers who are vital to the economy.
In Sri Lanka, a significant number of rice farmers depend on bank loans to support their agricultural practices. These loans provide the necessary financial resources for purchasing seeds, fertilisers, and equipment essential for cultivating rice. However, the burden of repayment rests solely on the shoulders of the farmers, who must manage their debts while navigating the challenges of farming in a variable climate and fluctuating market conditions.
Cultivation loans pose significant risks to the banking system. If a farmer’s crops fail, they become unable to repay the loan, which leaves the bank unable to recover its funds. This unfortunate situation has led to tragic outcomes, with several farmers losing their lives in the past.
The government allocates substantial public funds to offer fertiliser subsidies to farmers, ensuring they have access to affordable agricultural inputs. This financial support plays a crucial role in enhancing crop production and sustaining the livelihoods of those in the farming community. However, it also represents a significant investment of taxpayer money, highlighting the balance between agricultural support and fiscal responsibility.
Given the current situation, the government incurs substantial costs for rice production but does not receive a return on this investment. The only revenue the government gains comes from taxes imposed on companies selling rice.
Big profit for companies in selling rice
The rice selling companies mentioned first are involved in the rice production process when they purchase the rice produced by farmers. Until that point, the company owners do not invest in rice production; only the government and the farmers make investments.
Once the harvest is obtained, several distant companies become involved in the production process. Their involvement spans from converting paddy into rice to selling that rice.
The companies have made some investments in this process and have incurred costs for those investments. As a result, the rice they purchase should be sold at a profit, which is normal in business. However, the issue arises when we consider that the government and the farmers are the ones making the primary investments. When crop damage occurs, it is the farmers who bear the losses, while the companies reap the profits. This situation reflects a significant imbalance in the distribution of risk and reward.
These companies are clearly committing a significant fraud by disregarding the losses incurred by the public and the government. They unfairly control rice prices and maintain a monopoly, selling rice at inflated prices to the public and reaping excessive profits.
What did the previous governments do?
To address the situation, previous governments resorted to importing rice in an attempt to control its price. However, importing rice during the harvest season proved to be problematic. This strategy led to companies selling imported rice while hoarding domestic rice, resulting in prices that never decreased. Regardless of the supply available, the cost of rice remained high. Some unethical companies sold rice at inflated prices, exacerbating poverty among the population.
What should the government do?
President Anura Kumara stated in a television interview that there are two approaches to addressing the issue. The first is the strict enforcement of the law, while the second involves the government’s active participation in the production and trade of rice. He emphasised that reactivating the government-owned Paddy Marketing Board will help eliminate the influence of the rice mafia within the corporations. This is a commendable decision. Anura Kumara also highlighted the past fraudulent and negligent practices of the Paddy Marketing Board.
He disclosed to the nation just how significant the financial losses were due to the reckless policy that had been implemented. With unwavering candour, he also took the opportunity to critique the previous administrations, holding them accountable for their lack of foresight and responsibility in this matter.
Many people believe that this situation should resolve quickly. One of the main goals of appointing a new president is to eliminate fraud and corruption in the country, and it is evident that President Anura is committed to this cause. Unlike previous administrations, the new government’s focus should be on helping the common people rather than prioritising the interests of company owners, especially when it comes to addressing issues of malnutrition.
