Specific policies on agriculture included provision of input subsidies, guaranteed product prices and state owned marketing services. With the open economic policies introduced in1977, Sri Lanka liberalized some of these activities relating to agriculture and on a “second wave of liberalization” in 1990, the trade policy was further simplified. However, some of the inward looking policies continued to be extended even into the post liberalization period and imports of major sensitive agricultural commodities including rice, potato, chili and onions are still controlled through tariffs, non-tariff measures and quantitative restrictions. Thus, the present policy is neither liberal nor protective. To complicate matters further, the Doha Development Agenda demands a substantial improvement in market access, reduction and ultimate phasing out of export subsidies and domestic support. Consequently, nobody is clear about the real effects of the present day policy and how to continue with further policy reforms is not clear.
Fragmented research conducted so far in Sri Lanka does not shed enough light on the impacts of the existing agricultural policies and no analytical framework exists for the evaluation of the future policy impacts. On this background, PAM offers a repeatedly usable, simple static general equilibrium simulation model which provides a simple means of producing coherent sets of multiple efficiency indicators under different policy scenarios, which can be compared with the degree of liberalization.