ECONOMYNEXT – Sri Lanka’s rice crisis, where prices have soared and red rice disappeared from shelves due to price controls ahead of the New Year, was due to wrong government data, Minister Nalinda Jayatissa said.
“The actual problem is that there is no reliable data on the rice requirement of the country, how much is cultivated,” Minister Jayatissa told reporters at the weekly cabinet press briefing.
“A country cannot go forward like this.”
Minister Jayatisssa was responding to question from a whether it was true that beer production was the reason for the high price of rice.
Beer manufacture required only about 16,000 to 18,000 metric tonnes of rice a year, he said which was a small amount.
Sri Lanka had initially calculated that 70,000 metric tonnes of rice would be needed until the harvest, and had now imported around 168,000 metric tonnes.
In Sri Lanka rice prices go up towards Maha harvest season, as stocks are depleted price move towards the taxed price of imported rice and even higher if imports a controlled.
Shortages still persisted in red rice, due to price controls. Red rice tend to move towards Samba in some years, data show. It can be due to lower production, higher demand, tourism, or tourism linked poultry production.
Under a market system, the dispersed knowledge of the producers, the millers and buyers come together in a market clearing price without a shortage, and there is no need for state intervention.
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Higher prices would also shift consumption to substitutes (encourage eating of bread) allowing the system to balance, analysts have said.
The poor in Sri Lanka pay around 50 percent more than the rest of the world for comparable or lower grades of rice due to the one of the longest running protectionist schemes in the island.
In Sri Lanka yields are sharply lower (about 4,400 tonnes) than in China (about 7,000 kilo per hectare) and Vietnam (over 6,000 kilos), which have adopted market systems and confined state interventions to helping boost yield.
Sri Lanka also has actual import controls (licensing) due to pursuing autarky, which critics say is an unusually merciless ideology that emerged in Nazi Germany after the country’s World War I experience of Allied Blockades.
Sri Lanka had earlier blamed millers for hoarding rice as prices went up, but it was not found to be correct.
Related Sri Lanka rice millers are not hiding stocks: CAA Official
Animal feed production and ex-President Ranil Wickremsinghe was also blamed. (Colombo/Jan23/2025)
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