Drought affects rice prices

The prolonged drought has caused rice prices to rise, market sources said. Traders at the Pettah wholesale market said that supplies are low and prices have gone above stipulated prices.

According to statistics released by the Department of Census and Statistics (DCS) rice prices have increased between 2.7-12.9 percent compared to February 2013 prices. Traders said that further price increases can be expected unless the government imports rice. The drought has hit the Maha season harvest and destruction of crops have been reported from the Mannar district and in other rice growing regions there is a drop in yield.Since tanks and major reservoirs have dried up paddy cannot be cultivated in the Yala season.

Agriculture and irrigation authorities have advised farmers to shift to other crops.

Traders said that in the 2014 Budget, the minimum purchase price of paddy was increased by Rs. 5. But stipulated maximum selling price of rice was not increased.

Analysts said that an increase in rice prices will encourage farmers to increase rice cultivation and, therefore, paddy farming will increase in coming years.

If the government wants to ensure self-sufficiency in rice it should not allow imported rice to flood in, they said. Paddy farmers face a serious crisis as a result of high cost of production and lower paddy prices. Traders also said that other than the drought there is a possibility of market manipulation by mill owners. Today a cartel of mill owners control the rice market and with huge warehouses they control supply, they said.

Despite increase in rice prices inflation in February declined to 4.2 (year-on-year). It was 4.4 percent in January. Department of Census and Statistics sources said that the reason for lower inflation is the sharp decline in prices of several commodities such as vegetables.

- GW