Profits before people: confronting the rice mafia

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Fear of an alarming food crisis has hit the public, burdened by the shortage of fuel and gas and power outages, sending them scrambling to hoard rice. The recent press briefing held by a collective of rice mill owners and importers brought several issues the rice trade is facing, to the limelight.

While small mill owners suspect that the import of rice via the Indian credit line can close over hundred small mills, the country’s big hitters brawl over the prices of rice for the coming three months. 

Dudley Sirisena, who is considered the country’s biggest rice mill owner, in a dramatic exit stormed out of a media briefing on 22 June in Colombo following a disagreement over Government imposed control prices where large-scale rice mill owners sat together to discuss rice prices and shortages.

Mill owners to decide the price of rice

The heated situation arose when the Chairman of the New Rathna Group of Companies, Lankeshwara Mithrapala disagreed with the Chairman of the Araliya Group and the President of Rice Millers Association, Dudley Sirisena to sell rice at the government controlled price for the next three months, and requested relevant authorities to take steps to increase Rs 25 due to other expenses they have to bear due to the fuel shortage.

Sirisena said all rice varieties will be sold under the government approved controlled prices and suggested to increase the price paid for a bundle of paddy (64kg).

“Despite the fuel crisis and rising packaging costs, rice would be released from today at the prices set by the government and other rice producers should do the same. Especially when the price of diesel has gone up by Rs 250 compared to three months ago and the packaging cost has gone up by 300 per cent due to the shortage of raw material, it is extremely difficult to release rice to the market at these government controlled prices But as a local entrepreneur, we decided to sell rice at government controlled prices during this difficult time, regardless of profits,” he added.

Accordingly, Sirisena noted that a kilo of Nadu rice will be sold at Rs 220, a kilo of samba at Rs 230 and a kilo of Keeri samba at Rs 260. He said considering the recent import relief that was provided through the Indian credit line, the imported rice should be sold at a price Rs 30 less than the local paddy market.

“For these three months we should provide rice at the controlled price and increase the price that we pay for a bundle of paddy. The bundle that we buy for the Rs 7,500 should be increased to Rs 8,000; the bundle that we paid Rs 8,000 should be bought for Rs 9,000 hereafter. This will encourage farmers to harvest more and provide justice to the hardships that they go through due to the fuel shortage. If farmers cultivated during these three months by being encouraged by the said well-deserved price that was paid for their paddy, the country need not worry about a rice shortage. Though the fellow rice mill owners support the said decision, the Government is yet to respond in this regard,” he added.

Sirisena added that available rice stocks in the country will be sufficient for three months if the people consume rice sparingly.

Meanwhile, Mithrapala disagreed with Sirisena’s ideas and noted that he requested the relevant authorities to take steps to increase Rs.25 due to other expenses they have to bear with the fuel shortage.

Mithrapala said all should work according to the common law of the land.

“But we turn to government in a situation where we could not work according to the given regulations. Three-four weeks ago, we requested the Government to increase controlled prices for rice by Rs 25. That request was made because we have been compelled to go beyond merely comparing rice prices in a context where the prices of everything have increased. We respect the Government’s controlled prices. However, given the prevailing situation, a price increase would be beneficial. The farmers and sellers will do their part only when we pay them adequate amount, and the people will get rice.

A special price should be given to farmers without considering the Government  imposed price for paddy to encourage them to gain more harvest and to protect the farmers. In the current market, there is no demand for Keeri Samba rice but for Nadu variety. Therefore, we requested a ceiling of Rs 245 for one kilogram of Nadu rice,” Mithrapala said.

When Mithrapala said that a kilogram of Keeri Samba paddy was cheaper than Nadu paddy variety in the market, the verbal clash between the main rice mill giants began.

Following Mithrapal’s statement a heated situation rose, and Sirisena who refused to increase the price of rice, noted that the calculations made by Mithrapala doesn’t apply to the paddy stock they have taken for the price of Rs 7,500 per bundle and the rice mill owners can clearly provide rice to the market to the Government control price for the upcoming three months.

“Though many claimed that I’m the head of the rice mafia, people like Mithrapala who do not want at least occasionally reduce the prices of their stocks are the real face of this mafia the media has talking about,” Sirisena claimed. 

He further added that if such mill owners refuse to stick by the control price, the government should interfere and buy their stocks and sell it at a fixed price to the public.

Sirisena stated that rice should be released into the market at a fixed price. He said that all rice millers were trying to increase the price of rice in the market. 

He pointed out that the rice mafia was created by the other large-scale rice millers but not by him. “I am always trying to release rice to the market at a lower price,” Sirisena added.

In the meantime, when Ceylon Today asked Sirisena whether he is planning to increase the prices of rice after the termination of the stocks in three months, he noted that the said concern should be addressed after three months.

“We have stocks we bought for a lower price during last paddy season; first we should take steps to provide those at a controlled price to the public. If we do not have stocks after three months lets consume porridge,” he answered.

“Intermediaries stockpile and small amount remains with government”

Addressing the same press briefing, the All Ceylon Small and Medium Scale Rice Mill Owners Association’s President, D.K. Ranjith stated that intermediaries stockpile paddy and a small amount remains with the Government

“It is small and medium scale rice producers that produce close to 60 per cent of the country’s daily rice production. However, today, 80-90 per cent of that production process has come to a halt. Also, due to massive fuel price hikes, it is not possible to sell rice at controlled prices. Consequently, the required amount of rice does not get released to the market. In future, the amount of rice released by large scale rice mill owners will not be adequate to fulfill the requirement. This situation will lead to a more dangerous, queue which is the rice queue. I told large scale rice mill owners that they are also facing a dangerous situation, because the people will come after them,” he added.

Ranjith added that large and small scale rice mill owners, on various occasions, dealt with various issues and disputes.

“We should commend the decision Sirisena took, because, agreeing to sell rice at controlled prices at this juncture is equal to an attempt to control the impacts of the crisis. Sri Lanka has sufficient paddy stocks for at least three months, and it is coming from this year’s Yala Season’s yield. This paddy is with large scale rice mill owners, intermediaries that stockpile paddy, and a small amount remains with the Government. Farmers also have a small amount of paddy. It is the large scale rice mill owners who can play a big role in this process, and make these attempts more systematic,” he added.

Ranjith confirmed that Sri Lanka has paddy stocks for the next three months.

“Water has been provided for farming, and despite the fertiliser situation, farmers have started cultivating. From the on-going farming activities, we will receive paddy sufficient for at least three months. Therefore, there will be no rice shortage for another six-seven months. Panicking will only worsen the situation. Since there are adequate stocks for the time being, I request the general public to refrain from stockpiling rice. The Government must intervene in the rice production process, because costs have increased, especially owing to the fuel issue,” he added.

“Part of this mafia should be brought to light”

Meanwhile, M. Zaneer – KTC Group Chairman, an owner of a large scale rice mill, and an importer of food commodities including rice – also welcomed Sirisena’s stance with regard to controlled prices for rice. He opined that despite the fact that Sirisena came forward to give rice at a lower price to suffering Sri Lankans, Sirisena is identified by some as the face of rice mafia which he said is unacceptable.

Adding that the country should also introduce a controlled price for rice flour, Zaneer said, “There is imported rice, because the Indian credit line has given us priority to import several commodities including rice and wheat, among other things. Imported rice market will come down, and we can sell rice at a lower price as per Sirisena’s request. The rice was sold 260 per kilo but the flour market retail price sells each kilo of flour at a Rs 325 retail price. The said market has no control price whatsoever, where as it results in hoarding of rice or paddy stocks when the wholesale price is cheaper and selling it to a higher price as flour.”

Adding that there are solutions to all problems in the rice industry, Zaneer said that when dealing with the prevailing situation in the production and supply of rice, two parties need to be prioritised to keep the rice market stable. These parties are farmers and rice millers.

He spoke about the existing rice mafia, “According to my knowledge, neither the farmers nor rice millers get the proper profit, and a third party is profiting. We all should understand that a third party is active when it comes to the rice industry. They are making billions and they are the mafia. The President or the Prime Minister, whoever is concerned about this matter, should take this into consideration. For the past two-three years, I have been revealing this to ministers. I have solid proof, and even though I have spoken to the Consumer Affairs Authority (CAA) and ministers, nothing has happened,” he added.

In order to tackle the rice mafia, he opined, the Government should launch a large scale project to prevent third parties from stockpiling paddy.

In addition, Zaneer said that Sri Lanka has spent over USD 794 million to import rice, and that the country does not have to import rice if the Government took stable decisions with regard to the rice industry.

A common issue that echoed throughout the media briefings emphasised the fact that no government body has clear data on the stock that was stored and issued in the market in various forms. This lack of data creates a monopoly in the rice trade where the millers or the intermediaries can decide whether to hoard stocks or release resulting in monopolies and sudden price hikes in the market. The Government, lacking data to successfully handle the control price, is making rice a luxury for the majority instead of a staple. So who really should be blamed; the farmers, millers, Intermediaries, rice shop owners or the Government?

(Pix by J. Weerasekara)

By Nabiya Vaffoor