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This
paper reviews in detail agricultural and trade policies
and their implications for the domestic agricultural sector
in general and paddy, potato, big onion, and chillies in
particular during the 1995-2000 period. It also discusses
the problems and the role of state enterprises in agricultural
commodity marketing and various subsidy schemes implemented
to enhance production. The paper also documents the constraints
that hinder private sector investment in the domestic agricultural
sector and the specific incentives provided by the government
to attract more investment by the private sector. The paper
makes several recommendations for improving the policy and
the regulatory environment towards achieving a higher growth.
Three issues that warrant immediate attention are emphasized.
First, much attention has been paid in the recent past to
the issue of continued erosion of profitability of paddy
farming over the past several years. Increased cost of paddy
production is considered the cause. But, it is emphasized
that, it is not the only cause. Failure of the farm-gate
price of paddy to keep up with the rising cost of production
has also contributed to the problem of declining profitability
of paddy production. Second, it is essential to have a consistent
tariff policy in order to secure a sustainable long-term
growth in the sector. Ad-hoc changes in tariff rates, which
were characteristic in the recent past, are not conducive
to long-term growth. Such changes create great uncertainty
in the market and scare away producers, traders, and potential
investors. It is recommended that a uniform ad-valorem tariff
rate for all four commodities be implemented with the total
tax incidence not exceeding 50 per cent. Third, the forward
sales contract scheme recently introduced by the Central
Bank of Sri Lanka, in our opinion, is the only market-based
alternative to state intervention in agricultural commodity
marketing. It is suggested that this programme be taken
seriously by policy makers and be given state patronage
to increase farmer participation.
Table of Contents
- Introduction and Objectives
- Domestic Production and Imports
- Policies and Regulatory Environment in the Domestic
Agricultural Sector, 1995-2000
- Agricultural Marketing
- Subsidies
- Investment in the Domestic Agricultural Sector
- Policy Recommendations
- References
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