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Escalating Fertilizer Prices and Subsidy Removal

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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

Glimmers of hope?

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The newly appointed Cabinet Ministers leaves Cass un-uplifted. She need not elaborate. She wishes fervently that Dr Harsha de Silva will leave party loyalty aside and consider the country. Usually, it’s asking politicians to cast aside self-interest, which very rarely is done in the political culture that came to be after the 1970s. Thus, it is very unusual, completely out of the ordinary to appeal to Dr Harsha to forego party loyalty and do the very needful for the country by accepting the still vacant post of Minister of Finance. We are very sorry Eran W too has kept himself away.

Some of Cassandra’s readers may ask whether she is out of her right mind to see glimmers of hope for the country. She assures them she is as sane as can be; she does cling onto these straws like the dying man does. How else exist? How else get through these dire times?

What are the straws she clings to? News items in The Island of Tuesday 24 May.

‘Sirisena leaves Paget Road mansion in accordance with SC interim injunction.’ And who was instrumental in righting this wrong? The CPA and its Executive Director Dr Pakiasothy Saravanamuttu. It is hoped that revisions to the system will come in such as giving luxury housing and other extravagant perks to ex-presidents and their widows. Sri Lanka has always lived far beyond its means in the golden handshakes to its ex- prezs and also perks given its MPs. At least luxury vehicles should not be given them. Pensions after five years in Parliament should be scrapped forthwith.

‘Letter of demand sent to IGP seeking legal action against DIG Nilantha Jayawardena.’ Here the mover is The Centre for Society and Religion and it is with regard to the Easter Sunday massacre which could have been prevented if DIG Jayawardena as Head of State Intelligence had taken necessary action once intelligence messages warned of attack on churches.

‘CIABOC to indict Johnston, Keheliya and Rohitha’. It is fervently hoped that this will not be another charge that blows away with the wind. They do not have their strongest supporter – Mahinda R to save them. We so fervently hope the two in power now will let things happened justly, according to the law of the land.

‘Foreign Secy Admiral Colombage replaced’. And by whom? A career diplomat who has every right and qualification for the post; namely Aruni Wijewardane. If this indicates a fading of the prominence given to retired armed forces personnel in public life and administration, it is an excellent sign. Admiral Colombage had tendered his resignation, noted Wednesday’s newspaper.

‘Crisis caused by decades of misuse public resources, corruption, kleptocracy – TISL’.

Everyone knew this, even the despicable thieves and kleptocrats. The glaring question is why no concerted effort was made to stop the thieving from a country drawn to bankruptcy by politicians and admin officers. There are many answers to that question. It was groups, mostly of the middle class who came out first in candle lit vigils and then at the Gotagogama Village. The aragalaya has to go down in history as the savior of our nation from a curse worse than war. The civil war was won against many odds. But trying to defeat deceit power-hunger and thieving was near impossible. These protestors stuck their necks out and managed to rid from power most of the Rajapaksa family. That was achievement enough.

Heartfelt hope of the many

The newly appointed Cabinet Ministers leaves Cass un-uplifted. She need not elaborate. She wishes fervently that Dr Harsha de Silva will leave party loyalty aside and consider the country. Usually, it’s asking politicians to cast aside self interest, which very rarely is done in the political culture that came to be after the 1970s. Thus, it is very unusual, completely out of the ordinary to appeal to Dr Harsha to forego party loyalty and do the very needful for the country by accepting the still vacant post of Minister of Finance. We are very sorry Eran W too has kept himself away. As Shamindra Ferdinando writes in the newspaper mentioned, “Well informed sources said that Premier Wickremesinghe was still making efforts to win over some more Opposition members. Sources speculated that vital finance portfolio remained vacant as the government still believed (hoped Cass says) Dr Harsha de Silva could somehow be convinced to accept that portfolio.”

Still utterly hopeless

Gas is still unavailable for people like Cass who cannot stand in queues, first to get a token and then a cylinder. Will life never return to no queues for bare essentials? A woman friend was in a petrol queue for a solid twelve hours – from 4 am to 4 pm. This is just one of million people all over the country in queues. Even a common pressure pill was not available in 20 mg per.

Cassandra considers a hope. We saw hundreds of Sri Lankans all across the globe peacefully protesting for departure of thieves from the government. The ex-PM, Mahinda Rajapaksa’s answer to this was to unleash absolute terror on all of the island. It seems to be that with Johnson a younger MP stood commandingly.

Returning from that horror thought to the protesters overseas, Cass wondered if each of them contributed one hundred dollars to their mother country, it would go a long way to soften the blows we are battered with. Of course, the absolute imperative is that of the money, not a cent goes into personal pockets. The donors must be assured it goes to safety. Is that still not possible: assuring that donations are used for the purpose they are sent for: to alleviate the situation of Sri Lankans? I suppose the memory of tsunami funds going into the Helping Hambantota Fund is still fresh in memory. So much for our beloved country.

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Ban on agrochemicals and fertilisers: Post-scenario analysis

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By Prof. Rohan Rajapakse

(Emeritus Professor of Agriculture Biology UNIVERSITY OF RUHUNA and Former Executive Director Sri Lanka Council of Agriculture Research Policy)

There are two aspects of the ban on agrochemicals. The first is the ban on chemical fertilisers, and the second is the ban on the use of pesticides. Several eminent scientists, Dr Parakrama Waidyanatha (formerly the Soil Scientist of RRI), Prof OA Ileperuma (Former Professor of Chemistry University of Peradeniya), Prof C. S. Weeraratne (former Professor of Agronomy University of Ruhuna), Prof D. M. de Costa University of Peradeniya, Prof. Buddhi Marambe (Professor in Weed Science University of Peradeniya) have effectively dealt with the repercussion of the ban on chemical fertilisers which appeared in The Island newspaper on recently.

The major points summarised by these authors are listed below.

FERTILISER ISSUE

1. These scientists, including the author, are of the view that the President’s decision to totally shift to organic agriculture from conventional could lead to widespread hunger and starvation in future, which has become a reality. Organic farming is a small phenomenon in global agriculture, comprising a mere 1.5% of total farmlands, of which 66% are pasture.

2. Conventional farming (CF) is blamed for environmental pollution; however, in organic farming, heavy metal pollution and the release of carbon dioxide and methane, two greenhouse gases from farmyard manure, are serious pollution issues with organic farming that have been identified.

3. On the other hand, the greatest benefit of organic fertilisers as against chemical fertilisers is the improvement of soil’s physical, chemical and biological properties by the former, which is important for sustained crop productivity. The best option is to use appropriate combinations of organic and chemical fertilisers, which can also provide exacting nutrient demands of crops and still is the best option!

4. Sri Lanka has achieved self-sufficiency in rice due to the efforts of the Research Officers of the Department of Agriculture, and all these efforts will be in vain if we abruptly ban the import of fertiliser. These varieties are bred primarily on their fertiliser response. While compost has some positive effects such as improving soil texture and providing some micronutrients, it cannot be used as a substitute for fertiliser needed by high yielding varieties of rice. Applying organic fertilisers alone will not help replenish the nutrients absorbed by a crop. Organic fertilisers have relatively small amounts of the nutrients that plants need. For example, compost has only 2% nitrogen (N), whereas urea has 46% N. Banning the import of inorganic fertilisers will be disastrous, as not applying adequate amounts of nutrients will cause yields to drop, making it essential to increase food imports. Sri Lankan farmers at present are at the mercy of five organizations, namely the Central Department of Agriculture, the Provincial Ministry of Agriculture, the Private sector Pesticide Companies, the Non-Government organizations and the leading farmers who are advising them. Instead, improved agricultural extension services to promote alternative non-chemical methods of pest control and especially the use of Integrated Pest Management.

Locally, pest control depends mostly on the use of synthetic pesticides; ready to use products that can be easily procured from local vendors are applied when and where required Abuse and misapplication of pesticides is a common phenomenon in Sri Lanka. Even though many farmers are aware of the detrimental aspects of pesticides they often use them due to economic gains

We will look at the post scenario of
what has happened

1. The importation of Chemical fertilisers and Pesticides was banned at the beginning of Maha season 1 on the advice of several organic manure (OM) promoters by the Ministry of agriculture.

2. The Ministry of Agriculture encouraged the farmers to use organic manure, and an island-wide programme of producing Organic manure were initiated. IT took some time for the government to realize that Sri Lanka does not have the capacity to produce such a massive amount of OM, running into 10 tons per hectare for 500000 hectares ear marked in ma ha season.

3. Hence the government approved the importation of OM from abroad, and a Company in China was given an initial contract to produce OM produced from Seaweed. However, the scientists from University of Peradeniya detected harmful microorganisms in this initial consignment, and the ship was forced to leave Sri Lankan waters at a cost of US dollar 6.7 million without unloading its poisonous cargo. No substitute fertiliser consignment was available.

4. A committee in the Ministry hastily recommended to import NANO RAJA an artificial compound from India to increase the yield by spraying on to leaves. Sri Lanka lost Rs 863 million as farmers threw all these Nano Raja bottles and can as it attracts dogs and wild boar.

Since there is no other option the Ministry promised to pay Rs 50000 per hectare for all the farmers who lost their livelihood. It is not known how much the country lost due to this illogical decision of banning fertilisers and pesticides.

Recommendations

1. Judicious use of pesticides is recommended.

2. The promotion and the use of integrated pest management techniques whenever possible

3. To minimize the usage of pesticides:

Pesticide traders would be permitted to sell pesticides only through specially trained Technical Assistants.

Issuing pesticides to the farmers for which they have to produce some kind of a written recommendation by a local authority.

Introduction of new mechanism to dispose or recycle empty pesticide and weedicide bottles in collaboration with the Environment Ministry.

Laboratory-testing of imported pesticides by the Registrar of Pesticides at the entry-point to ensure that banned chemicals were not brought into the country.

Implementation of trained core of people who can apply pesticides.

Education campaigns to train farmers, retailers, distributors, and public with the adverse effects of pesticides.

Maximum Residue Level (MRL) to reduce the consumer’s risk of exposure to unsafe levels.

Integrated pest Management and organic agriculture to be promoted.

1. To ensure the proper usage of agrochemicals by farmers

All those who advised the Minister of Agriculture and the President to shift to OM still wield authority in national food production effort. The genuine scientists who predicted the outcome are still harassed sacked from positions they held in MA and were labelled as private sector goons. The danger lies if the farmers decide not to cultivate in this Maha season due to non-availability of fertilisers and pesticides the result will be an imminent famine.

The country also should have a professional body like the Planning Commission of

India, with high calibre professionals in the Universities and the Departments and

There should be institutions and experts to advise the government on national policy matters.

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Thomians triumph in Sydney 

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Nothing is happening for us, at this end, other than queues, queues, and more queues! There’s very little to shout about were the sports and entertainment scenes are concerned. However, Down Under, the going seems good.

Sri Lankans, especially in Melbourne, Australia, have quite a lot of happenings to check out, and they all seem to be having a jolly good time!

Trevine Rodrigo,

who puts pen to paper to keep Sri Lankans informed of the events in Melbourne, was in Sydney, to taken in the scene at the Sri Lanka Schools Sevens Touch Rugby competition. And, this is Trevine’s report:

The weather Gods and S.Thomas aligned, in Sydney, to provide the unexpected at the Sri Lanka Schools Sevens Touch Rugby competition, graced by an appreciative crowd.

Inclement weather was forecast for the day, and a well drilled Dharmaraja College was expected to go back-to-back at this now emerging competition in Sydney’s Sri Lanka expatriate sporting calendar.

But the unforeseen was delivered, with sunny conditions throughout, and the Thomians provided the upset of the competition when they stunned the favourites, Dharmaraja, in the final, to grab the Peninsula Motor Group Trophy.

Still in its infancy, the Sevens Touch Competition, drawn on the lines of Rugby League rules, found new flair and more enthusiasm among its growing number of fans, through the injection of players from around Australia, opposed to the initial tournament which was restricted to mainly Sydneysiders.

A carnival like atmosphere prevailed throughout the day’s competition.

Ten teams pitted themselves in a round robin system, in two groups, and the top four sides then progressed to the semi-finals, on a knock out basis, to find the winner.

A food stall gave fans the opportunity to keep themselves fed and hydrated while the teams provided the thrills of a highly competitive and skilled tournament.

The rugby dished out was fiercely contested, with teams such as Trinity, Royal and St. Peter’s very much in the fray but failing to qualify after narrow losses on a day of unpredictability.

Issipathana and Wesley were the other semi-finalists with the Pathanians grabbing third place in the play-off before the final.

The final was a tense encounter between last year’s finalists Dharmaraja College and S.Thomas. Form suggested that the Rajans were on track for successive wins in as many attempts.  But the Thomians had other ideas.

The fluent Rajans, with deft handling skills and evasive running, looked the goods, but found the Thomian defence impregnable.  Things were tied until the final minutes when the Thomians sealed the result with an intercept try and hung on to claim the unthinkable.

It was perhaps the price for complacency on the Rajans part that cost them the game and a lesson that it is never over until the final whistle.

Peninsula Motor Group, headed by successful businessman Dilip Kumar, was the main sponsor of the event, providing playing gear to all the teams, and prize money to the winners and runners-up.

The plan for the future is to make this event more attractive and better structured, according to the organisers, headed by Deeptha Perera, whose vision was behind the success of this episode.

In a bid to increase interest, an over 40’s tournament, preceded the main event, and it was as interesting as the younger version.

Ceylon Touch Rugby, a mixed team from Melbourne, won the over 40 competition, beating Royal College in the final.

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