Agricultural Policy : Sri Lanka

Agricultural Policy : Sri Lanka

Agricultural policy continued to evolve broadly in the direction of gradual government withdrawal from the production of crops and seeds, liberalisation of extension services and insurance, while developing market based methods of enhancing farmer welfare and safety nets.

In line with the National Seed Policy of commercialising the seed and planting material sector announced in 1996, the Seed Act is being drafted and will be presented to Parliament in the near future. The Seed Act focuses on enhancing the production and marketing of high quality seeds. Government has already initiated the duty free import of seed and planting material. In order to develop the production of quality seeds within the country, the government granted Rs.100 million in 1999 to strengthen seed production centres at Maha Illuppallama, Batalagoda, Ambalantota, Bata-Ata and Nikaweratiya. The private sector is expected to play an important role in the seed industry. Government has privatised in 1998 the Hingurakgoda seed farm owned by the Department of Agriculture (DOA) and the preliminary work connected with the privatisation of the Pelwehera seed farm was completed. The privatised seed farm at Hingurakgoda is progressing well and positive results are evident from the fact that there was no scarcity of seed paddy during the last Maha season.

In order to enhance the scope of agricultural insurance activities, a new act, the Agriculture and Agrarian Services Act was enacted during the year. With the enactment of the new act, the former Agricultural Insurance Board (AIB) was reconstituted with a wider scope and was named the Agricultural and Agrarian Insurance Board (AAIB). The new act will permit private insurance companies to take up crop insurance activities, which were a monopoly of the former AIB.

Agricultural extension services, provided solely by the government as a free service, was subject to liberalisation in 1999. With a view to improving efficiency and to making agricultural extension activities competitive, a fee based private extension service was initiated as a pilot project during the year, under the Second Perennial Crop Development Project funded by the Asian Development Bank (ADB).

Privatisation of state owned plantation companies, which commenced in 1995, continued during the year. The remaining government owned shares of the Namunukula and Talawakelle plantations, amounting to 20 per cent each, were sold to the public through the Colombo Stock Exchange in 1999. In the long-term interests of the viability of the plantation sector the Golden Shareholder was expected to monitor closely the activities of the plantation companies.

In the context of unsuccessful guaranteed price schemes to alleviate problems faced by small farmers in securing a reasonable price, the Central Bank initiated a forward contract mechanism for agricultural produce under the ‘Govi Sahanaya Scheme’ in a few districts. Forward contracts allow farmers and traders to enter into agreements for the purchase of pre-determined quantities of produce at pre-determined prices on a future date. Forward contracts facilitate farmers to reduce fixed marketing risks and realise less unstable prices. They will also benefit traders and consumers with stable supplies and prices.