Friday, April 18, 2008

the government has just controlled the price of rice

Just sit back and think this through. In order to control the spiralling price of rice, the government has just fixed the price of the basic varieties of rice. Today's papers said that the Pettah traders have closed their whole sale rice shops. Anyone is free to close their shop if they dont wish to sell their stock. The traders say they bought the rice from millers at highe prices than they are forced to sell, and therefore they prefer to withhold their stock instead of making huge losses in selling at controlled prices.

If this persists there will be a rice shortage and due to unsatiated demand a black market will spring up and the price of rice will shoot up to hitherto unheard of proportions. What is the government logic? in an era of increasing prices.

What I think the government should do is to sell its imported rice at what they claim they can at Rs 50/- then if the consumer switches to this the local price will fall and if the consumer does not like the imported rice the local price will remain. So let market forces prevail.

I am personally affected by this all the way, as I am a farmer who grows rice, I am a buyer of paddy from my neighbours at prevailing market rates, of varieties I do not grow, and I mill and transport fresh rice to my shop and customers and sell them at prices above what the govt has demanded I reduce to. I am not and will not reduce my price to make a loss. In any case the margins I make barely cover my costs, and I am damned if some authority tells me how to run my business. If my customers are not satisfied with my price they are free to go elsewhere.

When I incurr yield losses to by not putting pesticides, I need a higher price to even break even let alone make a profit, so no faceless body can order me to starve just to serve a short term conscience salving exercise amongst a disgruntled consumer.

Time and time again in my blog I have referred to short termism. We will not be in this situation if correct policies were in place to produce more efficiently and productively. I have mentioned that with very few policy changes such as land use and permitting larger units, our unit cost reductions and yield increases can be dramatic. If these had been in place such a situation will not arise. We must therefore not take it out on the farmer and trader, but the real culprits, the government backed millers who have the most to gain by storing and profiting from paddy.

Remember the government talks about hoarding rice. That is possible to a very small extent by traders, but storing paddy that can be kept for long instead of rice which is a perishable, is done by the government backed millers who should be the people to go after. They only manipulate the price of rice not traders.

I have noted this earlier, that our farmers are now hoarding their paddy to get a better price, and the millers are upset at having to pay more. With this government edict, they force farmers to cut their prices to millers who will in the end hoard the stock to raise the price and the farmer who just saw the light at the end of the tunnel is again cheated by a silly ruling that in reality cannot last much longer in practice.

So any lawyer who wants to challenge this gazette notification I will offer myself as the sacrificial lamb to save the farmer from further insult, when he just thought he may finally be able to earn a meager living from farming.

1 comment:

Anonymous said...

hello Raja,
I am sorry to hear this. As you wrote, after going through, water shortages, floods, labor shortages etc, you have to deal with this silly politicians. Remember most of them have very short term views, all they care is to get elected and to stay elected.
Most probably lobbyists from those big millers may have done this to get farmers to sell their rice. But you have something valuable above your shoulders, so use it. Activism or being sacrificial, not unless you yourself planning to be a politician.
I am very surprised at Japanese governments effort to save small rice farmers. Subsidies are two or three times the market price of rice! where they could easily buy rice from US for ridiculously low prices, like 10% of the domestic market value! The rice crisis is all over Asia.Prices have doubled in a year!
On the same note, could you grow those Japonica varieties of rice in SL? Shorter growing time, less water usage and longer storage times in one package.
Hope you will walk through these troubled times.