By Upali Cooray

(Former General Manager of CWE)

The Island newspaper has carried a very relevant editorial, on 5th December, as well as in recent times, in respect of the government’s agricultural policies. The government’s policy of permitting Divisional Secretaries to give approval to suitable farmers to clear forests in some areas for agricultural activity, while legal action is being taken against clearing swathes of forests in the Kallaru area, by a political strongman, during the yahapalana regime, amounts to duplicity.

My argument is that it is not necessary to clear forests at all because the present agricultural output would be more than enough if productivity in growing and marketing is improved two-fold. The authority to permit clearing residual forest land has now been given to the district secretary. These officials mostly become flexible in the face of political pressure. Of course, there are exceptions, such as Devani Jayatillake, the female forest officer who stood her ground despite a political strongman trying to force her to permit a wetland to be converted to a playground. The ignorance of one of the politician’s henchman was visible when he asked the female official whether oxygen can be ‘eaten’. (Oxygen kannada?)

It is pertinent to mention here that the constitution of Bhutan compels any of its governments to maintain a minimum of 60 percent forest cover, yet it has a forest cover of 70 percent. Also, it’s a carbon neutral country. I know that Sri Lanka cannot emulate Bhutan, but we must thrive to increase the forest cover as much as possible. What every government in the past has done and is doing is destroying forests gradually.

In order to debase the argument that residual forests should be cleared for agricultural activity, one must first ascertain how the present system of the agricultural marketing chain operates. It is a well-known fact that nearly 40 percent of the produce perishes by the time it reaches the final retailer.

A main drawback is the existence of multiple intermediaries causing low realization to the farmer, high losses and high prices to the consumer. Most of the lower level markets, such as the ‘pola’ and the ‘kada mandi’ markets are underdeveloped and imperfect. Over 90 percent of these markets are periodic, ill equipped and lacking in facilities. The farmers deal with collectors, commission agents and wholesalers. The number of growers who bring their vegetables to the government managed economic centres are a minority.

In Sri Lanka, the farmers have a strong bond with these intermediaries contrary to the perception that the intermediary is a swindler. Though the numbers of farmers, who bring their produce to the Government managed Dedicated Economic Centres (DEC), might show high numbers, many are collectors or traders who operate under the guise of farmers. They may even do some farming while their main activity is collecting. The evil picture of the middleman is not always correct.

The collector or the wholesaler mostly buys the produce from the farmer, on credit, and the settlements are made only when the produce is sold. Besides, many intermediaries are considered as personal friends in need, who will offer credit for contingency expenditure of the farmer family or for occasions such as weddings and funerals, etc, keeping the future harvests as collateral. Therefore these numerous intermediaries of the traditional inefficient channel of very low productivity have become an integral part in our country’s economy.

The hidden cost, healthwise consequent to consuming pesticide sprayed and unhygienically washed and stored vegetables have not been factored by any specialist and I have great doubt that the way the government is going about allowing more forest land clearance for agricultural activity will not give the expected result of increasing farmer income or reducing the cost to the cosumer. Besides this step will reduce the already depleted forest cover further. There will still be farmers engaged in subsistence agriculture at the mercy of the middleman

The DEC project was started in 1998 with the worthy vision of improving the productivity of the agriculture marketing channels and it was expected to be done through modern efficiencies in backward and forward integration. While the government owned the infrastructure, the traders operating were private wholesalers. The board of governors is appointed by the government and generally a person of Additional Secretary level at the Ministry of Trade or District Secretary is the Chairman. However, this seemingly modern idea was distinctive from the totally state owned and operated channels that existed at that time such as now defunct Marketing Department, Markfed and Sathosa. Even then, the private sector traders and wholesalers still dominated the system.

The DECs which have now grown to 15 in number have not been able to serve the purpose for which they were established due mainly to political interests taking precedence over the other economic objectives. Most of them have become political strongholds where middlemen with full patronage of the political strongmen of the areas have made them their power bases than serving farmers and consumers. DECs are just another link in the marketing channel adding to cost of the produce. The millionaire wholesalers obviously are funding their political masters and in return they are protected and allowed to hold sway in the market.

I vividly remember how some years ago, during my tenure in the CWE, a political strongman in an area famous for big onions prevented the CWE from entering into forward contracts with big onion growers for direct purchase from farmers. When he got to know the programme, he nominated one of his henchmen as a Chairman of fake farmer organisation from whom the CWE was directed to purchase onions. Chairman of the farmer organisation was in fact a commission agent. The Central Bank- sponsored forward contract programme, which was of immense benefit to the farmer, was sabotaged by this politician who is still a lawmaker.

Some private sector companies, in Sri Lanka too have done a total integration process of agricultural produce very successfully and a supermarket chain has been able to sell very good quality vegetables at lower or competitive prices. It is reported that the waste has been reduced to 10 percent and the dedicated number of out grower farmers in the chain is over 1,000.

There have been newspaper headlines, such as “fruits and vegetables sold near overflowing toilets” and the title “Dambulla- Economic centre scandal”. There was also a legal case which went before the Dambulla Magistrate where the courts have warned the manager about the unsanitary conditions of the Centre. This is a good illustration of the situation in the vegetable and fruit marketing exercise in Sri Lanka. Vegetable vendors and farmers washing vegetables in polluted canals and drains near the cities and towns is also a common sight.

The use of suitable plastic crates and wooden crates for transporting fresh vegetables and fruits is an effective way of reducing costs and minimising waste which is now said to be around 40 percent.

The primary objective of this exercise should be to give a higher income to the farmer and a lower price and good quality produce to the consumer. It is known that other developing countries which have already done total integration have found that farmer income could be increased by 20 percent and wastage reduced to five percent. Transportation in crates ideally has to begin from the farm gate and end with the retailer which means that the new rule has to be complied with by all concerned in the chain, starting from the farmer, the consumer being the exception.

There is going to be only a very minimal benefit enforcing the transporters and wholesalers/traders to use crates. Then the question arises whether such total integration of the supply chain is practical in the existing marketing channels. The present archaic system is driven by the sole objective of exploitation, nothing else, when the driving objective should be satisfying the needs of the farmer and the consumer. It is necessary to understand the inefficiencies in the present infrastructure set up of agriculture marketing which consequently results in an inefficient wholesale market.

Some other developing countries in South America, Africa and, specially India, have done total integration successfully in a completely different manner. Sri Lanka is still proceeding with the same archaic system with inefficiencies aplenty.

One can see lorry loads of vegetables being transported to various parts of the country packed in polypropylene bags and the labourers traveling while sleeping on the bags. The result of this need not be elaborated.

In these circumstances any major overhaul of the system could be manipulated in a manner more advantageous to the trader than the consumer or the producer. The wholesalers will still pay the same low prices to the farmers and keep his unconscionable margins when selling to the consumer. For instance, there have been occasions where Nuwara- Eliya vegetables brought to Dambulla DEC for transport to other parts of the country, have gone back to Nuwara- Eliya for resale during the April season. The reason is pretty obvious.

My umpteen visits and interactions in a long career in matters relating to procurement of agricultural produce, such as onions, potatoes, dhal, dried chilies, coriander, garlic and rice, from India, enabled me to closely interact with major state sector players, private sector traders, companies, farmers in many states of India and I have seen the strides taken by the Indian agricultural marketing channels towards modernization. The change that has occurred is remarkable. The responsibility of managing marketing channels for agricultural produce has been gradually taken over by the private sector companies that are selected by a government bidding process. The setting up of the channels according to guidelines spelt out by the government, is the responsibility of the companies. It is a practically possible and proven symbiosis of state and private sector. This is very much a state facilitated and guided system. The difference is that the most suitable companies with proven track records, and the professionalism, are selected.

The main equity holder is a company selected by a two- stage bidding process. Twenty percent to 40 percent of equity is subsidized by the government depending on the area, but the government, is not a shareholder and has no role other than monitoring to ensure that the company complies with required standards. Only the professionals selected by the company manage it. The farmer to retailer link is straight and there are less or no superfluous intermediaries. Producer and consumer satisfaction is very high.

It is known as the hub and spokes channel. The hub is known as a terminal market situated in a major city or a town. The spokes connect the hub straight, without or with a minimum of intermediaries. The hub offers facilities such as export processing, stocks for wholesale and retail trading, cold storage, temperature and sunlight controlled storage, ripening chambers, packing houses, quality testing facilities, cool chain transport, payments and market information.

Sri Lanka is a country with high humidity. Certain areas in the up country, specially the area in and around Boraland,a in the Badulla district, in the Uva province is very suitable for storage of big onions for long periods of two to three months without perishing. The onions lose weight due to lack of moisture in the atmosphere. The disadvantage is Boralanda is very far from the markets thereby increasing cost. However, the dry atmosphere, with low humidity can be emulated artificially by dehumidifiers or air conditioning near the market. Dried Chillies have to be stored in a very dark atmosphere with dehumidification. Fruits and vegetables in cold storage and ripening chambers.

Farmers bring produce to collecting and grading centres set up by the company in close vicinity to the farm, in crates having cleaned and graded them. Further cleaning and grading is done at the collecting centers. Though farmer/out-grower is dedicated to the company they have the freedom to select the buyer. But the Indian farmers are quite satisfied and happy with the companies and they have a better income, better methods of cultivation and their welfare is assured including support for children’s education.

Most farmers are changing rapidly to Agribusiness and are no longer subsistence farmers. Modern methods of increasing productivity are inculcated among all stake holders by the company. The farmer has instant information about the market, especially the prices, electronically conveyed at the farm. The sale of produce, at the terminal market, is based on electronic auctions and no middleman holds anybody to ransom or manipulate the system. Yet the traditional systems In India have not totally gone away and exists parallel to the modern system. The government does not meddle with it. But one can see it being given tough competition to exist.

Sri Lanka government should rectify the exploiter-based system which will leave no stone unturned to maintain the status quo. It is worthwhile to investigate and see whether there are hidden hands benefiting from the present system. It is high time to give up subsistence farming and inculcate the concept of Agribusiness to the farmer so that he would not be exploited by the middleman.

It will be prudent to think of the idea of operating a terminal market system with the collaboration of the private sector, initially as a pilot project with the option with whatever the adjustments necessary to suit local conditions. Terminal markets are not an Indian idea but appears to be borrowed from developed countries with adjustments in line with Indian market conditions.

I am fully aware that the government finds it difficult to subsidize various services to the people. This should not be a subsidy but only startup support to genuine companies having the expertise.

Let the present system remain with no more DECs. The government need not be shy to get guidance from the private companies that have already done this locally, though in a small way. Such a private state terminal market is a vital necessity in Colombo to compete with the Manning Market and Dambulla – a hotbed of inefficiency, waste and exploitation. The brand new modern vegetable market in Peliyagoda is a good place to commence it.

Let’s hope it will not fall a victim of the politically- controlled vegetable mafia.

The writer can be contacted on (egalawan288 @gmail.com)