An alternative method to paddy marketing

by Chandrasiri NANAYAKKARA

The 2011 Yala paddy harvest is now coming to the market. The purchasing create a big issue to the authorities and a burning problem to thousands of paddy farmers. This situation continuously arises twice a year in end of Yala and Maha cultivation seasons. The farmers of high paddy producing districts like Polonnaruwa, Anuradhapura, Matale and Hambantota are most affected.

The tedious cultivation process starts four to five months back in any cultivation season. Farmers struggle to get their cultivation loans, have ploughed their fields, sow the seeds, control weeds, irrigate and fertilise their fields, control pests and diseases, protect from wild animals and reap the harvest. As the staple food producers of the country they fulfilled their responsibility and the duty to the country. Finally the farmer expects a reasonable price through a smooth marketing channel because they have financial commitments to fulfill.

The government has declared floor prices considering the cost of cultivation and adding a reasonable profit which are Rs.30/- per kilo of samba and Rs. 28/- per kilo of Nadu. The estimated total production of this Yala is 1,916,138 mt from 501,017 hectares. The Treasury has allocated Rs. 2,175 million to purchase the paddy through the Paddy Marketing Board (PMB) at those prices. But PMB could purchase only a small percentage of the total production. The rest of the production goes to the private trader at a lower price.

Media reports show that farmers are facing problems with the present marketing system whether it is government or private trader purchasing.

The PMB paddy purchasing centres are not operating in time, delays to transact and payments; cause extra cost and frustration on the farmer. On the other hand the private traders pay a low price and sometimes it goes below or is equal to the cost of production.

Paddy purchasing by the government is a partial and costly solution subjected to a lot of criticisms by the farmer. Storage of large quantities of paddy implicitly adds an extra cost due to operational, storage and wastage costs. The inadequate attention for purchased paddy by the PMB, delayed reselling and processing deteriorates the quality. In this process the Treasury has to allocate a huge sum of money without considering the returns.

This article suggests a new concept in which the government (PMB) mainly involves as a facilitator in marketing process operating paddy auctions.

Auction market is an organised market in which the price adjust continuously in respect to shift in supply and demand. Other price determining factors are variety, quality, quantity and physical (transport) distance from farm gate to auction centres.

The key features are standardised produce (paddy) anonymous trading and competitive bidding.

The auctions are used in other agricultural produces such as tea and coconut and even fish trade efficiently without any burden to the Treasury.

To implement it to the paddy sector the PMB needs to change its mission and restructure it for the new challenges. The existing resources of it such as man power, stores, buildings and vehicles etc. could be utilised much more efficiently and the commitment of the government for funds could be drastically reduced.

The suggested organisational structure of the paddy auctioning system is briefly explained below:

The Organisation

i The Central Coordinating Centre (CCC)

The CCC comprises a committee represented by the Ministries of Co-operatives and Internal Trade, Agriculture and Agrarian Services. It also represented by the Treasury, Central Bank, PMB, HKAR&TI and relevant departments and representations from farmers and buyers. The key functions would be to implement, mobilise, monitor and evaluate seasonal and yearly marketing program. The committee decides the floor prices, the need of import in off seasons and buffer stock requirement of PMB in each season. It is responsible to the Cabinet in policy implementation.

The CCC develops and implements programs to invite and promote the newcomers to the purchasing and processing industry. It infuses new technology and promotes new value-added products. It provides/collects information to/from relevant agencies to develop operational programs. It directs District Coordinating Committees (DCC) and Auction Centers (AC) for efficient functioning in paddy purchasing.

ii. District Coordinating Centers ( DCC)

Each paddy producing district would have a DCC located at the administrative centre under the chairmanship of the District Secretary representing agencies pertaining to paddy production, farmer organisations and traders.

It maintains a register of eligible farmers/farmer organizations, cooperatives formally registered in local Auction Centres (AC) of the district.

It also maintains a register of buyers registered and they may be millers, stockist, suppliers to millers, cooperatives and PMB. The farmers and buyers could be categorized according to their capacity to sell or buy.

The DCC formulates the district paddy purchasing program, communicate with the CCC and guide and supervise the activities of ACs under it.

iii. Auction Centres (AC)

Depending on the farmer concentration, economic distance and the production capacity sufficient No. of ACs could be established in a district. It coordinates with the DCC and organises auctions depending on the paddy harvesting period.

It acts as a facilitator between buyer and seller. It issues contract agreements to buyers and sellers and supervises the transfer of money and paddy between the buyer and the seller.

iv. Staffing and Facilities of the AC An experienced marketing officer will be in charge of the centre. It consists of seed testing officers and supporting staff. The centre is equipped with an auction hall, storage facilities, paddy testing laboratory and other facilities. A bank can represent at the centre for money transactions.

v. Auction Procedure of an AC

Farmers could register at one or more desired centres. The registered farmers bring their sample/s in advance for quality certificate. It would include variety, processed date, quality, quantity offered for auction, available location, whether the farmer is willing to transport or buyers take over the paddy at the farm gate.

The auctions could be conducted on predetermined dates. The normal auction procedures are followed. This includes information flow to farmers and traders, written agreement with necessary conditions, payment procedures. Any disputes between buyer and seller are handled by an arbitration team immediately.

The writer is a former Project Manager of Parakrama Samudraya Paddy Project, Polonnaruwa and Ag. Economist to the Ministry of Lands, Irrigation and Mahaweli Development