Business

Rising price of rice in Sri Lanka: The roots and remedies

Published

5 years ago

2021/10/9

By Manoj Thibbotuwawa

Rice is the dietary staple and the major domestic crop cultivated in Sri Lanka since ancient times. Therefore, the production and availability of rice are closely tied to food security as well as political stability in the country. Every government since independence has given prominence to the goal of achieving self-sufficiency in rice. Accordingly, a significant amount of resources are allocated for the supply of irrigation water, land development, research on technological improvements, farm mechanisation, and support facilities such as credit, subsidised inputs, and farmer welfare measures.

As a result, the cultivation of paddy and production of rice increased steadily with Sri Lanka reaching near self-sufficiency in rice and rice imports dropping to an insignificant amount. Despite these achievements, problems relating to the paddy and rice sector continue to occupy a foremost place among the country’s socio-economic issues. At present, supply shortages and rising retail prices have caused severe social unrest. In this background, this blog identifies the current problems in the rice sector and suggests some policy recommendations.

Demand and Supply Dynamics of Rice

Rice is an essential consumer good with inelastic demand in the local market and the consumption of rice is important not only to the economy but to Sri Lankan culture as well. Based on 2016 per capita consumption of 104.5 kg per annum, the annual national rice demand was 2.1 million MT which is equivalent to 3.2 million MT of paddy. After adjusting for seed paddy, processing, waste and other requirements, Sri Lanka needs to produce 4 million MT of paddy to fulfil the above national demand. No significant change in national requirement is expected in the near future due to the balance between gradual reduction in per capita consumption and population growth.

Sri Lanka managed to achieve this target over the last two years and is on course to achieve the same this year as well. The 2020 Yala output of 1.9 million MT paddy (equivalent to 1.3 million MT rice) produced around September 2020 was sufficient to feed the country for about six months. The 2020 Maha output of 3.1 million MT paddy (equivalent to 2 million MT rice) produced around March 2021 is sufficient to feed the population for about nine months. The Department of Agriculture estimated a harvest of 1.5 million

MT for the 2021 Yala. Therefore, any current or speculatory rice shortage is not expected.

The Problem: Pricing Dilemma

The rice market has a delicate system of price determination that is associated with availability in the market. It is connected to seasonal harvests of Maha and Yala leading to high fluctuation of prices over certain months of the year. From January, the prices of paddy and rice decline gradually and reach their lowest in March with the major Maha harvest. It increases slightly from April and undergoes a minor slump during July-August when the minor Yala harvest reaches the market. The rise of the prices of all types of rice is quite sharp from September onwards reaching the peak in December and begin to decline again in January continuing the cycle. The difficulties faced by consumers due to a sharp rise in rice price during September-January is one of the most politically sensitive issues in the country.

Severe disruptions happened to this usual pricing mechanism in recent times by the cooperative decision making and anti-competitive practices of large and leading millers who have large storage facilities, purchasing power and economic stability. Farmers are inherently disadvantaged in the market because a large number of farmers sell their harvest at the same time due to lack of capacity to store paddy and credit bound relationships due to up-front capital requirement for uncertain several months.

Cooperative decision-making by large millers who handle a sufficiently large (about 33.8%) share of purchase in the paddy market gain an oligopolistic advantage by releasing large stocks of rice to the market during the harvesting period to create a glut so that they can purchase paddy at minimum prices. Also, their anti-competitive practices such as exclusive supply agreements, horizontal cartel practices and compelling farmers to sell paddy only to them prevent small scale millers from purchasing paddy. Curtailing stocks thereafter create a scarcity of rice to maintain a high price till the next harvest period.

The Remedies

Different command-and-control methods such as adhoc price controls and emergency regulations were used by successive governments to control the market. These were easy to enact, yet have proven ineffective. Therefore, measures that provide facilitation, monitoring, and regulation should be the key strategies of the government in both the rice and paddy markets while allowing market forces of supply and demand to determine prices.

Promoting competition is the key to constrain the oligopolistic market power enjoyed by the large millers. However, small and medium millers will find it difficult to survive in the market due to strong competition from the successful, large ones that dominate the space with wide-ranging products including premium and mass markets. Thus, small and medium millers should be empowered through credit facilities to buy paddy and to upgrade their mills to achieve economies of scale and production cost advantage.

Further, organising them under a suitable collective business model such as cooperatives will facilitate competition while providing a sustainable solution. In the meantime, as a short-term measure, the Paddy Marketing Board (PMB) can increase its purchases so that these can be milled by small and medium millers on a quota basis and distributed through Sathosa.

While the Consumer Affairs Authority Act, No. 09 of 2003 was designed to control anti-competitive practices that harm consumers, this is constrained by resource limitations and information asymmetry. This can be minimised by establishing a market information system with mandatory reporting under Section 12 of the Paddy Marketing Board Act No. 14 of 1971 which provides for recording data on production, sale, supply, storage, purchase, distribution and milling of paddy and rice.

Other than the anti-competitive practices, the cost of production of paddy and bargaining power are also factors that determine the price received by farmers. Modern technologies should be promoted to optimise the input use so that the cost of production could be minimised. The current policy drive on organic farming could be rationalised to reduce the dependency on costly imported inputs such as chemical fertiliser and agrochemicals gradually.

Small-scale farmers should be organised under suitable operational units such as The Japan Agricultural Cooperatives (JA) so that their farming efforts are coordinated and consolidated to increase their collective bargaining power. Decisions on rice importation should be based purely on market conditions given by the proposed market information system. These strategies can stabilise the prices of paddy and rice without severe fluctuations and make paddy farming a viable livelihood with a sustained income for small-scale farmers.

Link to blog: https://www.ips.lk/talkingeconomics/2021/10/07/rising-price-of-rice-in-sri-lanka-the-roots-and-remedies/

Manoj Thibbotuwawa is a Research Fellow at IPS with research interests in agriculture, agribusiness value chains, food security, and environmental and natural resource economics. He holds a BSc (Agriculture) with Honours from the University of Peradeniya, an MSc (Agricultural Economics) from the Post-Graduate Institute of Agriculture at the University of Peradeniya, and a PhD from the University of Western Australia. (Talk with Manoj – manoj@ips.lk).

All News Advertisement

Business

Focus on developing the Coconut and Food & Beverage export industries into a USD 3 billion economy within the next two years

Published

4 hours ago

2026/06/27

Priyan

A discussion was held on Friday (26) afternoon at the Presidential Secretariat between President Anura Kumara Dissanayake and industrialists in the coconut and food and beverage manufacturing sectors on developing the coconut and food and beverage export industries into a USD 3 billion economy within the next two years.

Accordingly, the objective is to expand the coconut-based export industry into a USD 2 billion sector and the food and beverage export industry into a USD 1 billion sector, and extensive discussions were held on the plans required to achieve these targets.

The President stated that the Government is prepared to provide every possible form of incentive necessary to promote export diversification and encourage value-added products.

Proposals and suggestions aimed at developing these industries were also presented during the meeting, and the President further noted that future plans would be formulated after taking all such proposals and recommendations into consideration.

The President also expressed agreement to provide incentives for establishing industries in the Northern Province and assured that the Government would extend its fullest support for setting up coconut-based manufacturing industries in the region.

Attention was also focused on plans to streamline the importation of raw materials required for export production while safeguarding domestic producers. President Anura Kumara Dissanayake further stated that his Government’s objective is to build the country’s economy into an export-oriented production economy by strengthening domestic supply chains.

Minister of Labour and Deputy Minister of Finance and Planning Anil Jayantha Fernando; Secretary to the Ministry of Finance, Planning and Economic Development, Dr Harshana Suriyapperuma; Secretary to the Ministry of Industry and Entrepreneurship Development, Thilaka Jayasundara; and Chairman of the Export Development Board, Mangala Wijesinghe, were among those present.

The President of the Sri Lanka Food Processors Association, Aruna Senanayake; Vice President Rasika Seneviratne; Managing Director of CBL Group, Shyamali Wickramasinghe; Chief Executive Officer of SriLankan Catering Ltd, Mangala Wijesekera; Managing Director of Ma’s Tropical Food Processing (Pvt) Ltd, Mario D. Alwis; Chairman of the Consumer Foods Sector of John Keells Food Holdings PLC, Daminda Gamlath; together with a number of leading business leaders from the food production sector were also present.

President’s Media Division (PMD)

Business

Sri Lanka Retailers’ Association unveils strategic roadmap for the future at 9th AGM

Published

13 hours ago

2026/06/27

Thilina Walpola

The newly elected Office Bearers and Executive Council of the Sri Lanka Retailers’ Association for 2026–2027.

The Sri Lanka Retailers’ Association (SLRA) successfully held its 9th Annual General Meeting (AGM) on 23 June 2026 at Hilton Colombo Residencies, bringing together members of the country’s organized retail sector to review the Association’s achievements over the past year and outline its strategic priorities for the future.

The AGM formally adopted the Annual Report and Audited Accounts for the financial year 2025/26 and elected the Office Bearers and Executive Council for the year 2026–2027.

Infiyaz M. Ali, Director of Healthguard Pharmacy Ltd, was announced as President of the Sri Lanka Retailers’ Association for 2026–2027. He will be supported by Mahesh Wijewardena, Executive Director and Group Chief Executive Officer of Singer (Sri Lanka) PLC, as Senior Vice President, and Kumar De Silva, CEO of SPAR SL Private Ltd, as Vice President.

The newly appointed Executive Council comprises senior representatives from leading retail organizations across Sri Lanka, reflecting the Association’s continued commitment to representing the diverse interests of the retail sector.

Addressing the gathering, President Infiyaz M. Ali emphasized the importance of collaboration, innovation, and industry advocacy in driving the next phase of growth for Sri Lanka’s retail sector.

“Retail continues to be one of the most dynamic sectors of the Sri Lankan economy. As consumer expectations evolve and technology reshapes the industry, the role of SLRA is to create opportunities for knowledge sharing, collaboration, and collective action. We remain committed to supporting our members and contributing to the sustainable growth of the retail ecosystem,” he stated.

The AGM was honoured by the presence of Wasantha Samarasinghe, Minister of Trade, Commerce, Food Security and Cooperative Development, who attended as Chief Guest. In his address, the Minister highlighted the importance of the retail sector as a key contributor to economic development, employment generation, and consumer welfare, while emphasizing the need for stronger public-private collaboration to strengthen the industry’s competitiveness.

Members also had the opportunity to gain insights from the Guest Speaker, Chayu Damsinghe, Head of Macroeconomic Advisory at Frontier Research, who shared perspectives on Sri Lanka’s economic outlook, emerging business trends, and the opportunities and challenges facing the private sector in the years ahead.

A key highlight of the evening was the presentation on the upcoming Sri Lanka Retail Forum 2026, SLRA’s flagship industry event, which will be held under the theme “Retail Without Boundaries – Building the Next Growth Engine.” The forum is expected to bring together more than 500 industry leaders, retailers, entrepreneurs, policymakers, technology providers, and investors to discuss the trends shaping the future of retail.

The Association reaffirmed its commitment to supporting retailers through industry advocacy, professional development initiatives, policy engagement, and knowledge-sharing platforms that foster innovation and business growth.

Since its establishment in 2015, SLRA has played a pivotal role in bringing together retailers from diverse sectors including FMCG, fashion, healthcare, consumer electronics, and digital commerce, creating a unified voice for the industry.

With a renewed leadership team and an ambitious programme of activities planned for the year ahead, SLRA looks forward to working closely with its members and stakeholders to strengthen Sri Lanka’s retail sector and contribute to the country’s economic development.

Business

Month-end profit-takings drive stock trading; indices up

Published

13 hours ago

2026/06/27

Thilina Walpola

CSE trading was yesterday driven by month- end profit-takings, market analysts said.Amid those developments both indices moved upwards. The All Share Price Index went up by 2.77 points, while the S and P SL20 rose by 10.91 points.

Turnover stood at Rs 1.91 billion with two crossings. Those crossings were; ACL Cables 2.1 million shares crossed to the tune of 209 million; its shares traded at Rs 100 and Hayleys 100,000 shares crossed for Rs 24.1 million; its shares traded at Rs 240.

In the retail market companies that mainly contributed to the turnover were: Hayleys Rs 141 million (587,000 shares traded), Lanka Realty Rs 105 million (1.8 million shares traded), CIC (Non Voting) Rs 81 million (3.1 million shares traded), HNB Finance Rs 79 million (8.3 million shares traded), Dialog Axiata Rs 56.7 million (1.2 million shares traded), Colombo Dockyard Rs 48.6 million (371,000 shares traded) and Singer SriLanka Rs 46.6 million (586,000 shares crossed).

During the day 63.9 million share volumes changed hands in 18300 transactions.

It is said that manufacturing sector counters, especially Hayleys, performed well while construction related companies, especially ACL Cables, also performed well. Banking sector counters, especially HNB, were also notable on the floor.

Meanwhile, Lee Hedges concluded negotiations with Amana Bank to sell and transfer its land and premises in Kollupitiya for a total consideration of Rs 2.7 billion, with the transaction completed on June 25, 2026.

Lee Hedges shares were trading up 2.52 percent, at Rs.325.75, while Amana Bank was up 1.13 percent at Rs.26.80.

Yesterday the rupee was quoted at Rs 336.90/337.00 to the US dollar in the spot market, from Rs 337.25/35 the previous day, while bond yields were quoted slightly higher, dealers said.

The telegraphic transfer rate for Sri Lanka’s rupee against the US dollar was 332.3416 buying, 342.0372 selling; the euro was 376.2315 selling, 389.9580 buying; and the pound was 436.5994 buying, 451.8110 selling.

By Hiran H Senewiratne