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Escalating Fertilizer Prices and Subsidy Removal

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4 years ago

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by Dr Parakrama Waidyanatha

The Maha harvesting of rice is now nearing completion and the strong indications are that this season’s crop decline would be 40% to 50% due to lack of fertilizer. Concurrently, the yields of other crops too are dropping and the tea yields of 2022 could be the worst affected. According available information, whereas the 2021 producer price was only Rs90.33/kg green leaf, the cost of production was Rs94.05 and the corresponding values for 2020 were Rs92.15 and 68.18. On the other hand, increasing the purchase price of paddy to Rs 90 from about Rs 45 per kilogram, even at the prevailing high price of fertilizer, could theoretically double the net returns compared to previous years (Table 2). However all crops are yielding far less this year compared to previous years given the fertilizer scarcity and even when available, the prohibitive costs.

According to the 2021 Global Food Security rating, Sri Lanka has dropped down further from the previous position of 66th a few years ago to the 77th out of 113 countries. Of the food parameters, affordability, availability and quality, the worst decline is in the food availability index, as to be expected, with the current food shortages..

We have been hit by a ‘double whammy’. The decision to totally shift to organic farming or ‘green agriculture’, a term often proudly uttered by the Minister of Agriculture, and the total ban of chemical fertilizer imports without assessing the organic fertilizer availability. Of course the shift to ‘green agriculture’ is not for the love of ‘healthy food’, often uttered by many without knowing the scientific evidence, but because of the shortage of foreign exchange for chemical fertilizer imports. And as seen from the Table 2 below, organic fertilizer will be as costly as chemical at prevailing prices, and not all farmers have the raw material to produce their own organic matter requirements.

Escalating fertilizer prices

The key factors driving fertilizer prices up were a supply shortage in the global market and the growing costs of natural gas, which account for up to 80% of variable costs in producing nitrogenous fertilizers. Faced with the highly expensive energy resources, many European producers had to stop production as they couldn’t compete with counterparts in Russia, countries in the Persian Gulf and northern Africa. As a result, the global supply of fertilizer decreased which led to subsequent price increases. The impact of the Ukraine war is yet to be seen. The COVID epidemic, especially in the west as also the closure of some factories in the U.S due to the bad winter weather during 2021 also contributed to production shortages.

The unprecedented escalating of chemical fertilizer prices globally, as evident from the Table 1, will now make it difficult for the government to provide chemical fertilizer at heavily subsidized rates given the current foreign exchange crisis. In fact the government has, smartly lifted the ban on chemical fertilizer imports handing over the ‘baby’ to the private sector implying that if farmers want they can procure fertilizer at market prices. Then how can the President condone his faulty assertion that if he gives chemical fertilizer with one hand he will have to give the farmer a kidney with the other! Would private sector imported chemical fertilizer not cause the kidney disease? A recent report by the Health Secretary has stated that there is no evidence to implicate agrochemicals in the causation of the Rajarata kidney disease, a position that has been held by the majority of scientists but ignored by the President and the Agriculture Minister.

Table 1.Global Fertilizer Prices (USD/Mt)

The current global prices of not only ammonia and ammonia-based fertilizers(urea) but also of soluble phosphates and potash have increased by 250%.during the last 14 months!(Table 1). Increasing energy costs have also increased mining costs of potash and rock phosphate resulting in their comparable magnitude of increase as ammonium fertilizers. The forecast s that because of continuing supply chain constraints, in particular energy, the fertilizer prices will not come down in the near future.

The overall mean cost of chemical fertilizer at prevailing retail prices is about 24% of the total cost of production whereas it was only about 10% before the price escalation due essentially to subsidies and lower global fertilizer prices.

The data prior to fertilizer subsidy removal presented here are based on those published by the Department of Agriculture in 2019 as those for 2020 and 2021 are not yet available. The farm gate and retail prices of vegetables for 2021/2 were obtained from the Agrarian Research and Development Institute. The prevailing average retail fertilizer price of Rs 8,000 per 50 kg bag was used for 2021/2 calculations. In calculating the 2021/2 net returns which are hypothetical, it has been assumed that the yields were similar to those before the government’s banning of agrochemicals in April 2021. Clearly the farmers obtained much lower yields than before, but the hypothetical calculations were meant only to show that at prevailing farm gate prices, the farmers could have earned far more for many crops had they applied chemical fertilizers even at the current high retail prices. Of course the problem was that chemical fertilizer was not available until recently, and the high producer and retail prices were a result of low production.

Table 2. Fertilizer costs, producer prices and net returns for some crops before and after the price escalation

Fertilizer costs and producer prices

As evident from Table 2 data at the current farm gate (producer) prices, except for rainfed rice, tea and beans the hypothetical net returns have been much higher for the other crops in 2021/2 compared to 2019 because of substantial increase in farm gate (producer) prices consequent on the decrease in production due to fertilizer shortages and exorbitant costs apart from bad weather; and the corresponding increase in retail prices. The farm gate price of paddy increased by two fold with the government defining a paddy procurement price increase of 100%. By contrast, the mean farm gate tea price was 4% lower than the cost of production as pointed out above because of very high comparative increase in fertilizer price. Although the producer prices of brinjal, carrot and most other vegetables too increased several fold the farmers’, earnings were severely curtailed by low productivity due to unavailability of chemical fertilizer.

The writer has reservations regarding the maize yields and production costs as that is a crop cultivated in many parts of the dry and intermediate zones, especially Badulla and Moneragala with substantial returns. It may be because the Dept. of Agriculture’s return calculations are based on dry grain prices whereas a fair share of the crop is sold at comparatively high prices as tender corn cobs.

It should be noted that although, the government is vehemently promoting organic fertilizer under its so called ‘Green Agriculture’ program, except for rice and maize, it is more expensive to the producer than chemical fertilizer at prevailing prices (Table 2).

Judicious fertilizer use

Studies reveal that 60-70% of the applied nitrogenous fertilizer is lost through leaching, runoff and vaporization with most crops. Losses of some other nutrients too could be substantial though not as high as nitrogenous fertilizers. Farmers should be taught the principles of judicious fertilizer use through which substantial reduction in losses and costs could be saved. “Little and often’ is one important principle in judicious fertilizer use.

It would appear that with judicious use, especially application based on soil nutrient levels and crop demand, the fertilizer costs could be substantially reduced. Although there is some effort to promote fertilizer use based on soil and foliar analysis to determine the exacting crop nutrient requirements, it is not adequately popular because of the high analytical costs. The government should strengthen the relevant services and make them available at reasonable costs to farmers. The consequent fertilizer savings could be substantial.

Fertilizer subsidy

The fertilizer subsidy policy has been changing, especially with change of governments. The Government in 2019 continued the policy introduced during the interim Government in 2018 to provide fertilizer at the concessionary prices of a 50 kg bag of any type of straight fertilizer at Rs. 1,000 and a 50 kg bag of mixed fertilizer to  Rs. 1,150.00 for crops other than paddy. The average subsidy borne by the Government on a 50 kg bag of paddy fertilizer then was around 86 percent of the market price.

A comprehensive study ( Ekanayake, H. K. J. 20060: Impact of fertilizer subsidy in paddy cultivation in Sri Lanka. Staff Studies; Central Bank of Sri Lanka, 36 (1 and 2): 73–92.) reveals that the fertilizer subsidy is not a key determinant of fertilizer usage in paddy cultivation. The study also found that there is a relatively higher correlation between fertilizer usage and paddy price than between fertilizer usage and fertilizer price. The author states that ‘the fertilizer subsidy could be withdrawn gradually over time. In its place, appropriate infrastructure and institutional facilities that are required to increase productivity in paddy cultivation and an effective mechanism for marketing the output that would result in favourable prices for paddy may be introduced for a more effective outcome’ The results of this study were also reported to be consistent with the findings of similar research in other countries.

Although the generally accepted view of economists is that governments should not indulge in business, would the above statement imply that if the Paddy Marketing Board is streamlined and effective, the paddy farmer can benefit substantially?

Further, a World Bank study(2013 ) entitled “What is the Cost of a Bowl of Rice” points out that the increase in farmers’ net income is small relative to the fiscal cost of the fertilizer subsidy, and that the government spends between Rs1.4 to 2.4 per acre to increase farm income by only a rupee per acre.

In conclusion, as evident in Table 2, the cost of the subsidized fertilizer in 2019 was 10.6% of the total cost of production that in 2022 without subsidy is 17.1%. However, because of the doubling of purchase price of paddy as also the highly escalated producer prices of other arable crops consequent on corresponding escalation of retail prices due to supply shortages, the increased fertilizer prices or subsidies had little bearing on the producer margins which were substantially higher in 2021/2 In other words, in this situation the fertilizer subsidy has no overwhelming impact on the cost of production of arable crops, and the government’s decision to ban the chemical fertilizer subsidy could lead to farmers moving towards more remunerative crops from rice, especially in the Yala season, in the Dry Zone, when it is more practical. However, the high retail prices is a huge burden to the consumer.

As pointed out above the increased cost of production by 4% over the producer price is would be devastating to the tea industry. The exorbitant fertilizer costs is reducing tea productivity substantially and the government should put in place either a price support scheme for the producer or a fertilizer subsidy which should only be 1-2% of the tea export earnings.

Escalated fertilizer prices should make rain fed rice farming especially in the wet zone unprofitable as seen in Table 2, implying that these paddy fields should be diversified into more profitable crops. In any case wet zone contributes only an insignificant quantity of rice to the national supply.


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Features

Ranking public services with AI — A roadmap to reviving institutions like SriLankan Airlines

Published

23 hours ago

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2026/03/13

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Efficacy measures an organisation’s capacity to achieve its mission and intended outcomes under planned or optimal conditions. It differs from efficiency, which focuses on achieving objectives with minimal resources, and effectiveness, which evaluates results in real-world conditions. Today, modern AI tools, using publicly available data, enable objective assessment of the efficacy of Sri Lanka’s government institutions.

Among key public bodies, the Supreme Court of Sri Lanka emerges as the most efficacious, outperforming the Department of Inland Revenue, Sri Lanka Customs, the Election Commission, and Parliament. In the financial and regulatory sector, the Central Bank of Sri Lanka (CBSL) ranks highest, ahead of the Securities and Exchange Commission, the Public Utilities Commission, the Telecommunications Regulatory Commission, the Insurance Regulatory Commission, and the Sri Lanka Standards Institution.

Among state-owned enterprises, the Sri Lanka Ports Authority (SLPA) leads in efficacy, followed by Bank of Ceylon and People’s Bank. Other institutions assessed included the State Pharmaceuticals Corporation, the National Water Supply and Drainage Board, the Ceylon Electricity Board, the Ceylon Petroleum Corporation, and the Sri Lanka Transport Board. At the lower end of the spectrum were Lanka Sathosa and Sri Lankan Airlines, highlighting a critical challenge for the national economy.

Sri Lankan Airlines, consistently ranked at the bottom, has long been a financial drain. Despite successive governments’ reform attempts, sustainable solutions remain elusive.

Globally, the most profitable airlines operate as highly integrated, technology-enabled ecosystems rather than as fragmented departments. Operations, finance, fleet management, route planning, engineering, marketing, and customer service are closely coordinated, sharing real-time data to maximise efficiency, safety, and profitability.

The challenge for Sri Lankan Airlines is structural. Its operations are fragmented, overly hierarchical, and poorly aligned. Simply replacing the CEO or senior leadership will not address these deep-seated weaknesses. What the airline needs is a cohesive, integrated organisational ecosystem that leverages technology for cross-functional planning and real-time decision-making.

The government must urgently consider restructuring Sri Lankan Airlines to encourage:

=Joint planning across operational divisions

=Data-driven, evidence-based decision-making

=Continuous cross-functional consultation

=Collaborative strategic decisions on route rationalisation, fleet renewal, partnerships, and cost management, rather than exclusive top-down mandates

Sustainable reform requires systemic change. Without modernised organisational structures, stronger accountability, and aligned incentives across divisions, financial recovery will remain out of reach. An integrated, performance-oriented model offers the most realistic path to operational efficiency and long-term viability.

Reforming loss-making institutions like Sri Lankan Airlines is not merely a matter of leadership change — it is a structural overhaul essential to ensuring these entities contribute productively to the national economy rather than remain perpetual burdens.

By Chula Goonasekera – Citizen Analyst

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Features

Why Pi Day?

Published

23 hours ago

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2026/03/13

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International Day of Mathematics falls tomorrow

The approximate value of Pi (π) is 3.14 in mathematics. Therefore, the day 14 March is celebrated as the Pi Day. In 2019, UNESCO proclaimed 14 March as the International Day of Mathematics.

Ancient Babylonians and Egyptians figured out that the circumference of a circle is slightly more than three times its diameter. But they could not come up with an exact value for this ratio although they knew that it is a constant. This constant was later named as π which is a letter in the Greek alphabet.

Archimedes

It was the Greek mathematician Archimedes (250 BC) who was able to find an upper bound and a lower bound for this constant. He drew a circle of diameter one unit and drew hexagons inside and outside the circle such that the sides of each hexagon touch the sides of the circle. In mathematics the circle passing through all vertices of a polygon is called a ‘circumcircle’ and the largest circle that fits inside a polygon tangent to all its sides is called an ‘incircle’. The total length of the smaller hexagon then becomes the lower bound of π and the length of the hexagon outside the circle is the upper bound. He realised that by increasing the number of sides of the polygon can make the bounds get closer to the value of Pi and increased the number of sides to 12,24,48 and 60. He argued that by increasing the number of sides will ultimately result in obtaining the original circle, thereby laying the foundation for the theory of limits. He ended up with the lower bound as 22/7 and the upper bound 223/71. He could not continue his research as his hometown Syracuse was invaded by Romans and was killed by one of the soldiers. His last words were ‘do not disturb my circles’, perhaps a reference to his continuing efforts to find the value of π to a greater accuracy.

Archimedes can be considered as the father of geometry. His contributions revolutionised geometry and his methods anticipated integral calculus. He invented the pulley and the hydraulic screw for drawing water from a well. He also discovered the law of hydrostatics. He formulated the law of levers which states that a smaller weight placed farther from a pivot can balance a much heavier weight closer to it. He famously said “Give me a lever long enough and a place to stand and I will move the earth”.

Mathematicians have found many expressions for π as a sum of infinite series that converge to its value. One such famous series is the Leibniz Series found in 1674 by the German mathematician Gottfried Leibniz, which is given below.

π = 4 ( 1 – 1/3 + 1/5 – 1/7 + 1/9 – ………….)

The Indian mathematical genius Ramanujan came up with a magnificent formula in 1910. The short form of the formula is as follows.

π = 9801/(1103 √8)

For practical applications an approximation is sufficient. Even NASA uses only the approximation 3.141592653589793 for its interplanetary navigation calculations.

It is not just an interesting and curious number. It is used for calculations in navigation, encryption, space exploration, video game development and even in medicine. As π is fundamental to spherical geometry, it is at the heart of positioning systems in GPS navigations. It also contributes significantly to cybersecurity. As it is an irrational number it is an excellent foundation for generating randomness required in encryption and securing communications. In the medical field, it helps to calculate blood flow rates and pressure differentials. In diagnostic tools such as CT scans and MRI, pi is an important component in mathematical algorithms and signal processing techniques.

This elegant, never-ending number demonstrates how mathematics transforms into practical applications that shape our world. The possibilities of what it can do are infinite as the number itself. It has become a symbol of beauty and complexity in mathematics. “It matters little who first arrives at an idea, rather what is significant is how far that idea can go.” said Sophie Germain.

Mathematics fans are intrigued by this irrational number and attempt to calculate it as far as they can. In March 2022, Emma Haruka Iwao of Japan calculated it to 100 trillion decimal places in Google Cloud. It had taken 157 days. The Guinness World Record for reciting the number from memory is held by Rajveer Meena of India for 70000 decimal places over 10 hours.

Happy Pi Day!

The author is a senior examiner of the International Baccalaureate in the UK and an educational consultant at the Overseas School of Colombo.

by R N A de Silva

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Features

Sheer rise of Realpolitik making the world see the brink

Published

2 days ago

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2026/03/12

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A combined US-Israel attack on Iran.(BBC)

The recent humanly costly torpedoing of an Iranian naval vessel in Sri Lanka’s Exclusive Economic Zone by a US submarine has raised a number of issues of great importance to international political discourse and law that call for elucidation. It is best that enlightened commentary is brought to bear in such discussions because at present misleading and uninformed speculation on questions arising from the incident are being aired by particularly jingoistic politicians of Sri Lanka’s South which could prove deleterious.

As matters stand, there seems to be no credible evidence that the Indian state was aware of the impending torpedoing of the Iranian vessel but these acerbic-tongued politicians of Sri Lanka’s South would have the local public believe that the tragedy was triggered with India’s connivance. Likewise, India is accused of ‘embroiling’ Sri Lanka in the incident on account of seemingly having prior knowledge of it and not warning Sri Lanka about the impending disaster.

It is plain that a process is once again afoot to raise anti-India hysteria in Sri Lanka. An obligation is cast on the Sri Lankan government to ensure that incendiary speculation of the above kind is defeated and India-Sri Lanka relations are prevented from being in any way harmed. Proactive measures are needed by the Sri Lankan government and well meaning quarters to ensure that public discourse in such matters have a factual and rational basis. ‘Knowledge gaps’ could prove hazardous.

Meanwhile, there could be no doubt that Sri Lanka’s sovereignty was violated by the US because the sinking of the Iranian vessel took place in Sri Lanka’s Exclusive Economic Zone. While there is no international decrying of the incident, and this is to be regretted, Sri Lanka’s helplessness and small player status would enable the US to ‘get away with it’.

Could anything be done by the international community to hold the US to account over the act of lawlessness in question? None is the answer at present. This is because in the current ‘Global Disorder’ major powers could commit the gravest international irregularities with impunity. As the threadbare cliché declares, ‘Might is Right’….. or so it seems.

Unfortunately, the UN could only merely verbally denounce any violations of International Law by the world’s foremost powers. It cannot use countervailing force against violators of the law, for example, on account of the divided nature of the UN Security Council, whose permanent members have shown incapability of seeing eye-to-eye on grave matters relating to International Law and order over the decades.

The foregoing considerations could force the conclusion on uncritical sections that Political Realism or Realpolitik has won out in the end. A basic premise of the school of thought known as Political Realism is that power or force wielded by states and international actors determine the shape, direction and substance of international relations. This school stands in marked contrast to political idealists who essentially proclaim that moral norms and values determine the nature of local and international politics.

While, British political scientist Thomas Hobbes, for instance, was a proponent of Political Realism, political idealism has its roots in the teachings of Socrates, Plato and latterly Friedrich Hegel of Germany, to name just few such notables.

On the face of it, therefore, there is no getting way from the conclusion that coercive force is the deciding factor in international politics. If this were not so, US President Donald Trump in collaboration with Israeli Rightist Premier Benjamin Natanyahu could not have wielded the ‘big stick’, so to speak, on Iran, killed its Supreme Head of State, terrorized the Iranian public and gone ‘scot-free’. That is, currently, the US’ impunity seems to be limitless.

Moreover, the evidence is that the Western bloc is reuniting in the face of Iran’s threats to stymie the flow of oil from West Asia to the rest of the world. The recent G7 summit witnessed a coming together of the foremost powers of the global North to ensure that the West does not suffer grave negative consequences from any future blocking of western oil supplies.

Meanwhile, Israel is having a ‘free run’ of the Middle East, so to speak, picking out perceived adversarial powers, such as Lebanon, and militarily neutralizing them; once again with impunity. On the other hand, Iran has been bringing under assault, with no questions asked, Gulf states that are seen as allying with the US and Israel. West Asia is facing a compounded crisis and International Law seems to be helplessly silent.

Wittingly or unwittingly, matters at the heart of International Law and peace are being obfuscated by some pro-Trump administration commentators meanwhile. For example, retired US Navy Captain Brent Sadler has cited Article 51 of the UN Charter, which provides for the right to self or collective self-defence of UN member states in the face of armed attacks, as justifying the US sinking of the Iranian vessel (See page 2 of The Island of March 10, 2026). But the Article makes it clear that such measures could be resorted to by UN members only ‘ if an armed attack occurs’ against them and under no other circumstances. But no such thing happened in the incident in question and the US acted under a sheer threat perception.

Clearly, the US has violated the Article through its action and has once again demonstrated its tendency to arbitrarily use military might. The general drift of Sadler’s thinking is that in the face of pressing national priorities, obligations of a state under International Law could be side-stepped. This is a sure recipe for international anarchy because in such a policy environment states could pursue their national interests, irrespective of their merits, disregarding in the process their obligations towards the international community.

Moreover, Article 51 repeatedly reiterates the authority of the UN Security Council and the obligation of those states that act in self-defence to report to the Council and be guided by it. Sadler, therefore, could be said to have cited the Article very selectively, whereas, right along member states’ commitments to the UNSC are stressed.

However, it is beyond doubt that international anarchy has strengthened its grip over the world. While the US set destabilizing precedents after the crumbling of the Cold War that paved the way for the current anarchic situation, Russia further aggravated these degenerative trends through its invasion of Ukraine. Stepping back from anarchy has thus emerged as the prime challenge for the world community.

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