Strategies for Food Sector Development | Daily News


 

Strategies for Food Sector Development

A Production Economy is a major topic today in the country arising as a result of the prevalence of the COVID pandemic. Sri Lanka experienced a production economy during the period 1970-77. Statistics show declining poverty and income inequality in that period but growth of per capita consumption declined from 2.3% to 0.7% in that period. The poor growth performance of this inward looking- state led growth strategy is inefficiency due to lack of competition arising from the state monopoly. It is acceptable fact today that competition creates efficiency and efficiency creates development.

Due to failure of the state led growth policy the new government of 1977 adopted a reverse policy of outward looking - private sector led growth with the aim of creating a newly industrialized country. In this context, state led organizations were either privatized (Steel cooperation) or closed down (Marketing Department). Deregulation policies such as foreign exchange control and price control were removed and the economy was opened for foreign direct investment and export development zones were established for FDI investment. With these initiatives the country achieved a high economic growth over 6% per year. However, development did not trickle down resulting in increasing poverty and spreading income inequality. Consequently, new concepts such as giving a human face to the open economy and social economy emerged to refine the open economic policies aligned with social needs or for inclusive growth. Nevertheless, agriculture was not given due attention due to ideology of cheaper imports without understanding its multiple effects such as employment, income, domestic savings and foreign earnings.

Overall, the growth created by open economic policies was not sustainable to absorb external shocks such as the COVID pandemic. The major drawback is implementing globalization without localization. The policy should be first localization then globalization. Comparing local economy with global economics is not correct without developing the local economy. Similarly, a knowledge economy was the slogan during last few years but expenditure on research and development is decreasing as a percentage of GDP. This policy mismatch is common in development history in Sri Lanka. The impact of this mismatch is that economic growth in Sri Lanka is only higher than that of Afghanistan. Since the country has come to the new era now this paper aims at providing strategies for the development of food agriculture which is an urgent mission in the context of corona.

Agro-food sector development is an urgent need to ensure food security in the country because maintaining food security through imports is not possible under the present global COVID pandemic. One reason is the inability to import food due to scarcity of supply in exporting countries and another reason is the shortage of foreign exchange. Imports will simply cost more. In this context, the best possibility is increasing the domestic food supply, but this should be well planned and monitored. Historically, Sri Lanka has bad planning and monitoring in agriculture. As a result, agricultural problems such as high cost of production, low productivity, post-harvest losses and price fluctuation remain unsolved for decades. If the country does not develop the food sector in the present crisis, price escalation is inevitable. Vegetable prices are often highest in the month of June in the year. If remedies are not made vegetable prices will be a critical issue in the near futhre.

Lessons learnt from the COVID pandemic

Sri Lanka is far ahead in controlling COVID pandemic compared to many counties in the world including developed countries such as USA. Five critical factors behind this success are 1) Good Leadership, (President, Director General of Health Services, leaders of Tri Forces and Secretary of the Defence Ministry, 2) devoted, committed and competent human resources from the top to the bottom 3) better planning addressing the root causes of the spread of the disease, 4) better monitoring and 5) partnership among participation agencies. These five factors should be applied to develop food agriculture in the country.

Development Approaches

a) Market driven production planning

The Market is an engine of agro-value chain development. Market reflects the needs of the buyers. Production should plan to meet the consumer needs. As Sri Lanka reached upper middle income status, the consumer food basket is very diverse and they need healthy and safe food. It has been found that plant based foods should be dominant for healthy diet. According to the Medical Research Institute (MRI) an average Sri Lankan should consume 400 grams of fruits and vegetables per day as against to 200 grams of actual consumption. This may be either availability or affordability or both. Production plans must align with the demand to correct this mismatch. Consumer requirement for each food items can be estimated per month based on the data from Household Income and Expenditure survey (HIES) done by the department of Census and Statistics once in three years. Then required extent can be worked out based on the average yield that is also available in the Department of Census and Statistics. Having identified the required extent to meet the monthly demand suitable areas can be identified by the Ministry of Agriculture both in the Provinces.

Next to rice, vegetables are the most important food group. As mentioned earlier, vegetable prices peak in June of the year. Hence, immediate attention should be placed to plan vegetable production. The highest consumer demand vegetables are beans and potatoes which are easy to plan and monitor because cultivation is dominant in a few districts. Four districts - Badulla, Nuwara-Eliya, Kandy and Ratnapura contribute over 80% of total beans production. Even within the district, crop concentrates are found in a few Agrarian Service Areas (ASC). The crop can be harvested within two months. Eighty percent of potato production comes from Nuwara-Eliya and Badulla districts. As same as beans, a few ASCs are dominant in cultivation. Planning should be done at ASC level.

From the market point of view, big onion is another crop that should be given immediate attention because nursery takes place in May. At present big onion is a Yala crop. Attempts were made to cultivate in the Maha season in some areas like Hambantota but success was limited. The entire annual demand cannot be met from the local production but six months can be managed from the Yala crop with a proper plan. Six months requirement would be 100,000 MT that could be obtained by cultivating 7000 ha with an average yield of 15 Mt/ha. This is an achievable target because the crop is cultivated both on highlands and lowlands in the district of Matale, Anuradhapura and the Mahaweli H area. Storage at farm level can be encouraged by adopting a price staggering policy i,e. Rs.60/kg at the beginning and RS.90/kg after two months and Rs.100/kg after three months and Rs.120/kg after 5 months.

b) Three seasons- cultivation

As land is a limiting factor cropping intensity should be increased on irrigated paddy lands by cultivating at least three crops per year in possible areas through efficient water management. For example, promotion of green gram cultivation is possible in mid-season under irrigated paddy lands which has being practiced by some farmers already.

c) Use of modern technology

The Cargills Company has implemented vegetable cultivation on high land using drip irrigation with insect proof nets. Under this modern agriculture method, the cost was reduced by more than 50% for some vegetables and the yield increased by more than 50%. This is an example for a low-input-high output farming system and it should be replicated in other areas as well. The problem of promoting modern agriculture is high initial investment which is around Rs.500,000 per acre.

d) Reduction of yield gap

It is evident that the actual yield is around 50% of the potential. That means there is ability to increase production under given technology by strengthening the extension service. If the yield gap reduces by 50% there would be a big impact on increase in production. Agricultural graduates recruited under the graduate employment program could be utilized to increase productivity. Sri Lanka is one of the countries where one extension officer has large number of farm families.

e) Home garden cultivation

This has already been discussed in many forums and in fact it is not a novel concept. The problem is effectiveness of earlier programmes such as Food Production Programme in which one million home gardens were targeted. It was found that seeds were distributed to the people who were not required for the programme. Hence, monitoring is necessary to check the usage. Output is the most important aspect in the monitoring process for the effectiveness and sustainability of the programme.

f) Post-Harvest Loss (PHL) reduction

Losses can be reduced substantially by improving post-harvest management. Many losses occur due to bad handling, packing and transporting. This is due to carelessness. Losses have been reduced 5-10% in the supermarket chains due to supply chain management. It was also found that losses are high during the season as compared to off-season. This indicates the need of production planning to avoid a market glut. Overall, both production and marketing plans are necessary to reduce PHL rather than introducing high cost programmes such as cold chain.

g) Organized marketing

Since production and marketing are two sides of the same coin the marketing plan should go on par with production. Although there are criticisms on rice marketing, innovative marketing activities such as producing good quality rice, packed rice with labeling and direct distribution to the retailers using big trucks instead of lorries could be observed. The problem is developing a natural monopoly due to leaving out those who are unable to compete with big millers. From the economist’s point of view, this is due to declining average cost in the long run in the presence of advantage of economies of scale. This situation can be rectified by imposing regulations to declare stock position and making transparency in business. A transparent flow of information is necessary for a sustainable value chain. It may be very difficult to introduce a new value chain for rice due to the lack of cost advantage to new comers.

Besides a rice marketing system, no innovative marketing activities except for supermarket chains, could be seen in non-rice produce marketing. The system is entirely in the hands of disintegrated small-scale traders. Also, the supply chain is lengthy with many players and hence loading and unloading take place several times before reaching the consumer, causing food losses and high costs of marketing. Unlike rice, new supply chains can be introduced to improve marketing of non-rice crops under this inefficient system. There are two possibilities in this regard: promoting a company based value chain model and a farmer based value chain model. The company based agro value chain models such as export promotion village (EPV) program was a failure in Sri Lanka due to absence of a transparent information flow among actors including farmers. Similarly, famer based agro value chain models such as farmer companies failed due to the lack of managerial and business skills. A critical success factor of any well-functioning value chain is the level of trust and collaboration among actors. At present, there are two donor funded projects (Smallholder partnership programme and agricultural modernization project) that deal with establishing agro value chains. Past experience is necessary to study when setting up new value chains. E-marketing channels should be the best option to develop because it is highly cost effective.

h) Maximum use of available resources

This is an important because public money is crucial under economic depression. Hence, existing mechanisms should be used rather than creating new entities. Sri Lanka has a strong organizational structure from national level to grassroots level. At village level, there are Agricultural Research and Production Assistants (ARPAs); Development officers and Agricultural Instructors are employed at divisional level; Agricultural officers, and Assistant Directors are working at district level and there are many agencies such as Department of Agriculture, Department of Export Agriculture, Department of Agrarian Services, Hector Kobbakaduwa Agrarian Research Institute, Council for Agricultural Research and Paddy Marketing Board. Organizational efficiency can be improved by adopting management principles of responsibility, authority and accountability.

i) Efficient monitoring systems

At present there is a monitoring system carried out by the Divisional Secretary at divisional level, District Secretary at district level and Secretary of the Agricultural Ministry at national level. Despite the several agricultural development programmes implemented in the past such as “AMA” and Food Production Drive Program, the performance of the agricultural sector is unsatisfactory as evident by the low growth rate. The possible reason for this situation is poor monitoring. Therefore strengthening of existing mechanism is urgently required to monitor on going activities and to make remedies when the actual situation deviates from the planned situation so that targets can be realized.

(The writer is a Senior Lecturer, Faculty of Agriculture, Rajarata University of Sri Lanka)


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