Macroeconomic Adjustment Needs For Food Crops Sector
Hema Senanayake
On Monday of this week, President Maithripala Sirisena met with top level agriculturists and agricultural administrators of the country. It is a good sign that the president himself took a greater interest to emphasize the essential need of establishing a vibrant and viable non-plantation agricultural sector. I like it but there is a serious problem or an issue which has not been paid due attention. What is it?
Even if we assume that all technical issues in regard to productivity have been resolved, this important sector of the economy cannot thrive or cannot be made reasonably efficient and viable unless we make an important macroeconomic adjustment in regard to this sector. In fact the problem has reasonably been identified. But the required macroeconomic adjustment has not accurately been identified. It is about the prices or the marketing.
When farmers are about to harvest their crops, the crop could be big onion, potato, chilies or even something else, the prices in the market plunge. Farmers cannot sell their produce at a reasonable price. This has been a recurrent phenomenon year after year in recent times. This is a problem that needs to be resolved. How do we resolve this?
According to Dr. Harsha De Silva, other than the work of racketeer importers, there is a significant information asymmetry in this sector. This means that farmers are not getting true market information in regard to the demand. So what the farmers do is that all farmers begins to cultivate crops which had good prices in the previous season and as a result in the current season there would be more produce than the market demand. According to him, therefore the problem is not in the free market mechanism but in the information asymmetry. So, he promised during a TV program that the issue of information asymmetry would be tackled and resolved after the next government is established after the coming parliamentary election. Unfortunately, I am beginning to feel that this is a hypothetical solution for a hypothetical issue. The practical and true problem is a different one. Let me submit it. Read More