Sunday, December 25, 2011

A sustainable approach in reducing cost of food production without subsidy

Ratmale tank a month ago before the rains that made it spill

We spend Rs50B in a fertilizer subsidy using imported inorganic toxic fertilizer. I challenge the government to reduce the subsidy in half by increasing the cost of fertilizer and instead use the Rs25B saved to do the following.

There are over 10,000 tanks that need serious renovation, and restoration, along with 10,000 irrigation canals that require the same. This is mainly in the form of labor or equipment driven by labor for which most of the cost will be pumped back into the economy, rather than being spent on imported fertilizer.

I need not go into the details of the tank restoration except to illustrate one detail of many that illustrate its sustainability. The Minneriya tank that supplies the water to my paddy fields fills up within a week of heavy rain in the area. One thousand years of silting has reduced the capacity to about a quarter of its original holding capacity. How about a dredger to continuously dig up the ‘rom mada’ of the tank, and bag it and sell it to the farmers as good organic fertilizer! This will keep a dredger busy for a few years and will pay for itself as the revenue from sales will exceed the cost of the dredging.

The dire need for the irrigation canals to be restored will pay immediate dividends in ensuring predictable irrigation to the fields, which can then be cultivated with the surety of water, something I have no guarantee from my canal for Yala. This in my opinion will at a stroke improve the yields on agriculture and also reduce the concentration of the toxic chemical fertilizer that gets added to the soil and as there will be less run off by underuse, which will not add to health problems encountered in areas such as the North Central Province’s current epidemic of kidney disease.

It really should not take a rocket scientist to work out the benefit of this suggestion, considering this is actually infrastructure development for the future as opposed to the fertilizer subsidy that is a one off electoral carrot of dubious long term benefit to both agriculture and the nation as a whole.

I urge the government to sell this concept to the people at large. This is above petty party politics and is long overdue. There are thousands of acres that will come under the plough under this implementation which can only add to the nation’s food production and while some inefficient farmers may have to look to better sources of revenue, the efficient farmer will benefit and thereby the nation as a whole. So when I saw that only 600 canals did receive some form of repair this year as the money allocated was a mere Rs280M, I felt the need to point this out.

Saturday, December 24, 2011

Why the government should scrap the crate regulation immediately as a New Year present to the Public

My previous blog entries have covered the practical aspects of this rule, and why it is that it will not work in the Sri Lankan context unless it is tied in with a host of allied initiatives, when worked together will improve the quality of the food we eat and reduce the waste, from the farmers fields to the dinner table. This holistic approach will cover the loss from animals and humans at the growing stage, to transporting in economically sensitive means like rail, which can handle the inevitable increased volumes as well as cool transport that will preserve freshness and longevity and use the services of the latest technology of internet, mobile phones and sales statistics to match producer to consumer, via the retailer.

The Crate regulation only touches a VERY minor area of this food chain, and the transport mafia who engage in price fixing an even more insignificant part in the overall waste. If Jhonny wants to tackle the transport mafia he should first take steps to control price fixing, which affects both farmer and consumer. That issue is not touched on by the crate issue, though in his simpleton’s mind Jhonny thinks it amounts to one and the same thing.

He should begin by using the pricing mechanism to sell the large crates at Rs250 and a few rupees less for the smaller ones. If this is done for a year, I am sure the usage of crates when it makes economic sense will increase by leaps without anyone being forced into it. Now that half the volume of the transported vegetables and fruit do not come under the crate rule anyway, it is silly to force only some items to be transported that way. What if the mafia say no? Jhonny’s threat to use the Army or a govt. transport system is going to increase inefficiencies at the expense of the consumer and be a retrograde step instead of being progressive. So he is going to lose his job and the consumers will have to pay a huge price for their food yet again.

I have been trying to get my hands on the particular report that talks about the wastage, to ascertain if the information that the crates alone will lead to a 40% less wastage. I think not and it is but one area, all of which result in this figure. This then means the crate issue will reduce losses by say 10% at most and the increased transport cost, will actually make the costs higher, and not lower for the consumer.

This is not the time to play politics with people’s lives. It is time to understand the extent of the problem, and have a master plan to solve it. By this method all stakeholders can be invited to participate and adopt a 'best practice' method only. It is a violation of Fundamental Rights to force people to do something, which is not necessarily in the best interests of the majority, unlike driving on the left side of the road.

Thursday, December 15, 2011

Not the last word on the ‘Crate Saga’ but some food for thought

There is a lull now in the battle for crates. Bukki Johnston is now planning his next move in the New Year. He has got burnt and he is angry. I believe he must go back to basics and find out why his so called ‘Trader Mafia’ are reacting this way.

As I suggested the Govt. must order a million crates to be delivered in 2012, and agree a price with the supplier of Rs500 which is the supplier’s cost. It should then be sold to anyone who wants one at Rs250, so that there will be widespread availability of crates, and the price issue on crates can be eliminated. The cost to the government of this is Rs250 million which is peanuts compared to the fertilizer subsidy of Rs50B or two hundred times as much.

Once that issue is resolved, see how both the farmer and trader accept their use. If they think they can profit by this there will be acceptance. I know for a fact that the Rs1750 price with a huge cut for the manufacturer and the person given the govt. contract has added to the problem. Then it is the transporter and wholesaler who have to be tackled.

The increased volume is a huge cost to them, even the laborers at the Economic Centers who are paid according to the pieces they carry, will either cost a lot more and the number of vehicles required to transport will also cost a lot more. Both these will add to the cost of produce from farmgate to the wholesale market. So if Johnny maintains that the 40% wastage can be saved then say the transporter now has 20% more produce and therefore his increased cost can be matched by the increased volume. It does not work like that unless the retailer who buys from the wholesaler is willing to pay more for the vegetables so transported, which I am afraid is not going to be the case. He will say that much is wasted at his end when it is unsold at the shop front. Each one has a different agenda which does not work in tandem.

So it is better not to enforce a law that effectively impounds vegetable transporter lorries that CANNOT practically carry crates (4 lorries of the current type will be needed for the same weight) but to gently coax and encourage their use. Use the Cargills Food City example where they feel it is worthwhile as they buy direct at farmgate from a number of appointed farmers and use their own transport medium to get the produce to the stores eliminating a lot of middle men along the way. In this way they are able both to reduce waste, give the farmer better terms, get it quicker and therefore fresher to the store and the stores themselves have state of the art refrigeration systems to keep them for longer. However if you talk to Cargills they do this at a very high cost, as the transport is so much more expensive per unit as I have already mentioned, and they make up for it by saving on wastage. This is something the transporter or trader CANNOT do as they are in a middleman transporter business supplying a lorry and driver to move goods and make a profit from the difference between cost and selling price after deducting the costs of transport. This latter cost is what all the fuss is about. These transporters really believe the crates will not just eat into their profit, it will drive them out of business, as they will not be able to sell for a greater price to cover the increased transport costs, as the retailers are unwilling to pay just because less produce is damaged in transit. It is all a question of logistics, supply and demand and the costs along the food chain. You cannot fool people when it is their bread and butter.

It is plain that the government has not realized this equation and taken steps to get them thinking in the right direction before passing unreasonable laws. It is a natural way for the opposition to score a whole lot of points in making the case as I have above and explaining to the public that the most practical way to reduce post harvest loss is by attacking all the aspects and not just the crates.

It is interesting now that the list of vegetable that are not covered by the plastic crate requirement has grown substantially almost making a mockery of the legislation in the first place. It was interesting that the green chillies that now cost about Rs700 a kg has also been excluded from the requirement. In this case one MUST understand that the weight loss due to moisture loss is about 10% per day for the first 3 days from harvest. So the name of the game is to get it into the consumers’ food basket in record time for the farmer to benefit. Otherwise there is a HUGE price difference between farmgate and retail.

The Ministry of Consumer Affairs can be fooled by the farmers and traders too as the former have no clue about the nuances I have explained above. There are many factors which must be considered and NOT just the plastic crates in isolation.

In summary therefore if I was the Opposition, I would make a statement that they oppose using the law, and instead wish to encourage by reducing the price of crates to Rs250 for the whole of 2012 only, and to ask those all round to use these crates whenever they can to transport fruit and vegetables, if it can be practical. If it is impractical it also means it is not cost effective. Unless the govt. is prepared to subsidize a whole host of areas from cost of vehicles, to fuel, they do not have the right to demand this practice. Show me any country on the face of the earth that has made this a law. I don’t think there are any and why should Sri Lanka be the exception to this rule. So Johnny should be sacked and the law set aside.

Wednesday, December 14, 2011

Plastic Crate Saga is not surprising bearing in mind the lawmakers are on speed!

It is hardly surprising that battle lines are drawn on the enforcement of the Plastic Crate transportation edict. I reported this a few days ago (8th December) in my previous blog entry that it was about to erupt. The government should have known better. You cannot change a lifetime of habit by an edict. It may take about 2 years.

So we all suffer due to government intransigence yet again. Yesterday 250g carrots cost Rs100. Can you think of US$4 a kilo of carrots! When I lived in the US in a farming area of the San Jaochim Valley a whole plastic crate of carrots was the same price, how ironic!!

What next? It was interesting that the Minister was extolling on TV yesterday that he has informed his officials not to prosecute farmers bringing produce in gunny bags if they come in Landmaster Tractors!! lest he would face mounting protest. He has therefore singled out the ‘large transporters’ for particular blame.

It must be said that Johnston Fernando, the Minister of Consumer Affairs maintained on TV yesterday that up to 40% of produce was lost in transport alone, and that the farmers would receive a greater income under the new policy. I dispute both facts. The farmers will receive no greater income, as they do not lose. They sell at farmgate. They are too poor to transport except in a few instances. The lower volume loss in transport may actually result in lower prices to the farmers!!

For farmers, the disadvantage of transport in crates as opposed to the current system in their tractors outweighs the advantages in a max of 5% of produce loss in their transport to the nearest wholesale purchaser. It is typical that the authorities have no clue about all the steps in the food chain, and have just taken a report out of context, without realizing all the steps in transport. I have dealt with this topic at length a long time ago as well, and my thoughts are still the same. If the Minister read my blog a while ago he would not have made such a fool of himself.

It is the trader mafia that calls the shots. The consumer and the farmer pay the price. Please keep the farmer out of this. He must have a higher unit price for his produce, and the continuing instances of oversupply that depress the prices to suicide inducing levels will not be changed by the plastic crate policy. As a transporter and a retailer as well as a home delivery specialist I can say that very often at the retail level a substantial amount of produce is wasted due to the lack of storage (refrigeration) facilities. That is a problem that is again not addressed by the plastic crate policy.

If you are a fruit stall with bunches of banana for sale, how much wastage of unsold banana do you think you have? It averages about 25%. So the trick is to educate them in the use of the excess unsold banana. Research into making some food items using overripe banana should be an important priority for ITI. I remember, making banana fritters from this but there are only so many fritters you can eat. Is there a method to make frozen fritters cheaply and popularize it?

Getting back to the main aspect of my report IT IS to find a compromise both parties can live with, as a face saving move. Now that the battle lines are drawn and Johnny does not want to look a fool in the same way he threw away thousands of coconuts from Kerala into the sea, and made a cut on cheap and unsellable eggs from India he is now into his umpteenth scandal. I also heard today that some close connection of his is involved in the manufacture or at least of marketing of the crates at Rs1750 each even though it is sold on a monthly payment basis not exceeding Rs100 a month. Who is kidding whom? People who purchase this know that the interest is built into this price already.

I was very sad to see these crates being thrown from the top of lorries yesterday on the TV news. I know they can be damaged and transportation suffers as the stackability of these crates is also an issue along with the volume that can be carried in a cost effective manner.

The Compromise should be to sell the crates at a subsidized rate of Rs500 each for immediate purchase. Anything more is prohibitive as most of the vegetables carried in each crate are of lesser value than the crates themselves. The cost of road transport is in essence the difference between profit and loss, and the market economy cannot justify the increased requirement of vehicles to transport lower weights unless someone subsidizes them. So the government which has no clue as to how the market economy works, must try and understand why these traders are protesting vehemently, and the consumers and farmers suffer for different reasons.

I am afraid in this the President intervenes and the consummate politician that he is will climb down on this demand and shift the blame completely onto Johnny who could lose his portfolio at the next cabinet reshuffle. I still believe some good will come out of this, it will get farmers, traders and consumers to think through the problems in wastage, and find solutions to all the problems, by not transferring the blame a trader led protest, and find solutions for the most cost effective means of reducing the massive wastage between what is grown and what is consumed. IT IS NOT ALL A PLASTIC CRATE ISSUE. So how about a good rail transport policy to shift volumes that the road system cannot hope to do without more congestion?

Thursday, December 8, 2011

Plastic Crates and Eating Bread, the Cretins Rule OK

First there was the direction for the umpteenth time from Johnston Fernando that from December 11th, that is the day after this Saturday, Poya anyone caught transporting fruit and vegetable in bags will be prosecuted using the full force of the law.

Then there was the usual off the charts saying from the Prime Minister that we should ban the import of fruit, and that the price of wheat flour should be increased to a level where no one can afford it.

In summary these are the people who we have elected to lead this country and no one seems to raise an eyebrow, let alone stand outside one’s house with a placard saying we must get rid of these cretins as it gives a mad man a bad name!

Is it that we believe they are totally mad? and so ignore them or do we accept what they say and wait for them to act on their say so? Either way we seem to have lost our voice of reason even to point out the absurd and vilify the sayer so they just shut up.

I have used plastic crates from the day I transported my fruit and vegetables. I had to pay a fortune for these crates even then, and I had to protect them with my life from being stolen while my pick-up truck was unattended. Yes we would all like to have plastic crates and transport in plastic crates, but unless we can both ensure that there is a proper mechanism and accountability for the crates, in the back and forth transport mode, much in the same way we paid a Rs50 deposit when we used a Tomato wooden box in transporting tomato, there is no way we can adhere to this requirement. When a plastic crate costs Rs1000 we do not want to exchange a nice new crate for a decrepit one. Especially as there are many different types and sizes. At least the Tomato box was a standard size and quality!

The other significant point is the transport lorries are not built for crates. When you take the same weight of produce in crates you need a minimum of a 100% increase in the volume for transport, which the current trucks cannot accommodate. They may have to be high sided being able to stack the crates up to the heavens to transport. If the weight is compromised the haulier will have to charge that much more per kg transported. To him the wastage or loss in transport is not the issue, it is taking as much as possible weight wise to make his trip economical. The wastage of course is a national issue, but we must come up with a holistic solution. I have always recommended overnight rail transport as that system can carry the volumes better than road, and it will also be more environmentally acceptable too. However we must work towards it, though at present we are not geared to it. We must ask why this rule that has come into effect for nearly a year has not been acted on despite the numerous threats by the same minister. Well is this latest outburst a repeat of this? The idea is good Minister, see how you can implement it practically given the ground situation, and not make asinine statements each time you get hot under the collar!

As for the Prime Minister he still has a head of jet black hair in his eighties and is known to make statements when he in a pique. On a serious note, if we ban the import of fruit then we do not give our consumers a choice. We do not necessarily protect our own production as it is usually fruit that we do not grow that we import. Of course we have farmers who complain that due to the cheap apples, people do not eat papaya. Sometimes many of the imported fruit is much cheaper than local fruit such as mangus, and mango that are at astronomical rates. If we ban the import of fruit then these same fruits will become more astronomical.

Is the Prime Minister assuming that when the prices rise, when imports are banned, we will grow more fruit. That is only on a long term trajectory, where in the short term only wealthy will be able to imbibe in a mango! I am not sure if there is a tax on imported fruit that does not have a local substitute, but a nominal tax is acceptable, though I see that Pakistan is complaining that we have put exorbitant taxes on fruit and vegetables we import from them. Primarily Oranges and Potato.

I grow fruit. I have problems with the distribution system, once my home delivery business was aborted due to an accident. A banning of imports is not going to change anything, it may pay for my inefficient production methods, and I will have less incentive to be more efficient. We should not be in the business of making the farmer more inefficient, we must make him more productive. This will not do that.

As for the Wheat Flour being priced out, then bread will become unaffordable and we will have to eat rice and rice based products only. Of course there may be more research into making more foods using rice flour as a substitute, but it will astronomically increase the prices of short eats and fast food.

Wheat flour is already taxed heavily, yielding the government a lot of tax income. However in an era where people look for convenience often unable to get home in time from work in order to cook a rice meal, they prefer to buy a snack at take outs. The working public will be further inconvenienced as rice based cooking is more time consuming. The person staying at home can cook his three rice meals!