SPECIAL REPORT

FAO/WFP CROP AND FOOD SUPPLY ASSESSMENT MISSION TO SRI LANKA

9 April 1997

• 1. OVERVIEW
• 2. AGRICULTURE IN THE BROADER ECONOMIC CONTEXT
• 3. FOOD CROP PRODUCTION IN 1996/97
• 4. FOOD SUPPLY SITUATION

1. OVERVIEW

In 1995/96, Sri Lanka experienced a serious drought which significantly reduced production of both the main Maha and secondary Yala rice crops. The population in the north were particularly affected by the drought and by continued civil strife, which accentuated food supply difficulties. In view of these events, and at the request of the Government a joint FAO/WFP Crop and Food Supply Assessment Mission was recently fielded to review 1996/97 rice production and the overall food supply situation. In addition to discussions with Government, UN agencies and NGOs, at central and district level, field visits were made to the main rice producing areas of Kurunegala, Anuradhapura, Polonnaruwa, Moneragala, Hambantota and Ratnapura. Although the mission visited Vavuniya, which acts as a co-ordinating office for the uncleared districts of Vavuniya (North), Mannar, Kilinochchi and Mullaittivu, the northern part of the country was not visited due to the prevailing security situation.

Rice is the most important staple in the diet. It is produced over much of the country, but the major growing districts are Kurunegala in the north-western province, Ampara in the eastern province, Polonnaruwa and Anuradhapura in the north-central province and Mahaweli "H" area, which together account for 55 percent of total production. Rice is cultivated during two seasons; the main Maha season (October-March) usually accounts for about 65 percent of annual production with the remaining 35 percent coming from the second Yala crop (April-September). Although almost two thirds of the rice crop is grown under irrigation, production is heavily dependent upon rainfall during the north-east monsoon and to a lesser extent on the south-west monsoon.

Rainfall during the 1996/97 Maha season was low and erratic. Although it was favourable in September 1996, encouraging pre-planting preparations for the Maha crop, a significant decline in October severely affected land preparation and planting. As a result, the area planted in the Maha season remained similar to 1995, which was severely affected by drought. However, subsequently, there was some improvement in rainfall compared to the previous year. Notwithstanding drought in northern parts and erratic rainfall in other producing areas, the Mission estimates that the total harvested area of the 1996/97 Maha crop at 477 000 hectares, some 9 percent above 1995/96. Average yields were also better: 3.3 tons/ha compared to 3.1 tons/ha in 1995.

Overall rainfall was not sufficient, however, to assure adequate water supplies in reservoirs and tanks. This will affect planting of the 1997 Yala crop even if summer monsoon rains are normal. The mission forecasts that some 257 000 hectares will be cultivated during the Yala season, some 8 percent more than 1996, but 33 percent less than the bumper crop in 1995. The projected yield for Yala paddy is estimated at 3.3 tons/ha, similar to the Maha crop.

The Mission estimates aggregate production of the 1996/97 Maha crop at 1.602 million tons and forecasts the output of the 1997 Yala crop at 855 000 tons. Overall, paddy production available in 1997 is therefore estimated at 2 457 000 tons, 22 percent more than last year, though four percent less than the average for the preceding five years.

The total availability of milled rice for 1997 is estimated at 1 682 000 tons, based on a milling rate of 66 percent and a carry-over stock of 60 000 tons. Against this the country requires

2 170 000 tons for total utilisation, including consumption, seed, feed and contingency stocks. This leaves an import requirement of 488 000 tons of rice for 1997, most of which is anticipated to be commercial. In addition it is assumed that the Government will import some 900 000 tons of wheat.

Rice farmers normally retain sufficient quantities of rice at harvest to cover domestic requirements, with any surplus being marketed. However, in anticipation of a reduced Yala crop this year, less rice is expected to be sold. The flow of imports will therefore be important in determining price and delays may result in an increase as they did in 1996.

Part of the population in the north has not been able to practice normal farming during 1996/97 due to civil strife and drought conditions and do not appear to be benefiting from government provided food rations. Although the situation is continuously being monitored, to the extent feasible, by FAO and WFP any assistance would only be possible depending on future improvement in the security situation.

2. AGRICULTURE IN THE BROADER ECONOMIC CONTEXT

[ Sources of information. International Monetary Fund: Sri Lanka, Background Papers, May 1995, Min of Agriculture, Lands and Forestry: World Food Summit Position Paper, August 1996, Department of Census and Statistics: Statistical Abstract 1995 & Statistical Pocket Book 1996]

Sri Lanka switched to a more market oriented economy in the late 1970s with the introduction of a package of structural adjustment measures. The policy focus was on (a) the elimination of direct state control on economic transactions as well as of price distortions resulting from these controls; (b) a larger role of the private sector in the economy; and (c) a change from an inward to an outward oriented economy. Subsequently, real growth in Sri Lanka over the last two decades has averaged between 5 and 6 percent, coupled with positive growth in real per caput income throughout most of this period. However, since 1985, economic growth has been adversely affected by civil disturbances in the northern and eastern parts of the country which contributed to a significant reduction in private investment.

The economy, which was traditionally dominated by agriculture, recently showed signs of greater diversification. The contribution of the agriculture sector (agriculture, forestry and fishery) to GDP declined from around 40 percent in the 1960s to 23 percent in 1990, and to 20 percent in 1994 and 1995.

The relatively robust growth performance continued to be underpinned by the manufacturing sector, which recorded growth rates of 9.1 and 9.2 percent in 1994 and 1995 respectively, representing some 20 percent of GDP in 1995. The services sector, which accounts for about 50 percent of GDP, continued to grow at about 5 percent in 1995. [Although tourism grew at 2.5 percent in 1995 despite the deteriorating security situation, it fell significantly in 1996.] Growth in the construction and mining sectors, which collectively contribute about 10 percent of GDP, was 5 and 3.5 percent respectively, in 1995, as compared to 6 percent for each in 1994.

The agricultural sector showed an overall rate of increase of 3.3 percent in 1994 and in 1995. Paddy farming continued to be a strong contributor to agricultural expansion. Although growth of the plantation sector (tea, rubber, coconut) slowed considerably in 1995, it still registered a growth rate of 3.25 percent. Employment in agriculture dropped from 45 percent of the total labour force in 1990 to 34 percent in 1994 due to slower growth in the sector compared to manufacturing and services. However, in 1995, the share of the labour force employed in agriculture rose slightly to 37 percent.

An estimated 1.8 million families are engaged in farming, which is dominated by small-holders, with 64 percent of farm families cultivating holdings of less than 0.8 hectares. Permanent agricultural land comprises 1.6 million hectares or 25 percent of total land area. Of this, nearly 43 percent is under plantation crops and some 49 percent under paddy, though not all paddy land is cultivated every season.

There are many restrictions on the diversification of land use, on full private ownership of land by farmers in settlement schemes and on the transfer of public land. These limit the scope for diversification and impede investments in the agricultural sector.

Government policy has consistently placed high priority on increasing domestic production of rice to attain self-sufficiency. Given the intensive nature of paddy production, investment has been oriented to large-scale irrigation schemes, land development/settlement programmes, free provision of irrigation water and fertiliser subsidies. Irrigation projects are categorised as either Major Schemes, with command areas from 80 hectares to 4 000 hectares or Minor Schemes, with a command area of less than 80 hectares. The ability of these schemes to provide irrigation water still depends, to a large extent, on sufficient rainfall to replenish tanks and reservoirs. Only the Mahaweli Irrigation System, which was developed in the late 1970s/early 1980s has permanently available water through diversion of the Mahaweli River. Large scale investment in irrigation has increased the area cultivated and also stimulated the introduction of high yielding technologies. This in turn has led to an increase in yields. As a result, production initially increased to some 2.7 million tons in 1985. But, this production level has not been sustainable. Paddy production dropped to some 2.1 million tons in 1989 and remained at an average level of 2.5 million tons between 1990 and 1994. Exceptionally good weather conditions in 1994/95 resulted in production of 2.8 million tons in 1995, the highest level since 1985. It appears that the policy to increase rice production by all means has led to inefficient land use with expansion to areas that are not economically and ecologically suitable for paddy production. For many irrigation schemes, the command area has become too large in relation to water availability even in normal rainfall years.

3. FOOD CROP PRODUCTION IN 1996/97

Rice is by far the most important staple and is planted on between 750 000 to 850 000 hectares annually. Of this, the main Maha crop (Oct/Mar) accounts for 500 000 to 550 000 hectares and the second crop Yala (Apr/Sept) for 250 000 to 300 000 hectares. On average, some 200 000 hectares (140 000 hectares in Maha and 60 000 hectares in Yala) are cultivated under rainfed conditions with the remaining area being irrigated, at least to some extent. However, the success of rice production remains dependent on rainfall, during the Northeast monsoon for Maha and during the Southwest monsoon for Yala. Rice normally requires about 200 mm of rainfall per month or the equivalent through irrigation supplies. As this amount of rainfall is not normally received throughout the Maha and Yala seasons, the crop is constantly under the risk of drought. The collection and storage of rainwater in reservoirs and tanks is, therefore, necessary to provide supplementary water. In low rainfall years, less water is stored in reservoirs and tanks as a result of which planted area is reduced or the crop suffers moisture stress, especially under minor irrigation and rainfed conditions.

Rainfall during the 1996/1997 Maha season was low and erratic compared with a normal season. In September 1996, well above average rainfall was recorded in Western province (Colombo, Gampaha, Kalutara districts), Sabaragamuwa province (Ratnapura and Kegalle districts) and in Central province (Kandy and Nuwara Eliya districts). In Moneragala, Hambantota, Matala, Kurunegala, Puttalam and Batticaloa districts, rainfall was slightly above average whilst in Badulla, Anuradhapura, Polonnaruwa (North Central province) and Trincomalee (Eastern province) it was below average. The Northern districts (Jaffna, Kilinochchi, Mullaittivu, Mannar, Vavuniya) were particularly hit by drought - having received only some 15 percent of average rainfall during September. From October to January, overall rainfall was below the monthly average all over the country. However, favourable rainfall during September replenished the level of water in reservoirs and tanks which had previously been depleted during the 1996 Yala season.

3.1 Paddy production in 1996/97

3.1.1 Paddy Area

Maha 1996/97 - Although favourable rainfall was received in September 1996, a significant decline in October severely affected Maha land preparation and planting. As a result, cultivated area remained similar to the previous Maha season, which was severely affected by drought. For 1996/97, therefore, planted area was 498 000 hectares, 5 percent below average for the last three years and only 88 percent of 1994/95, a favourable crop year. Nonetheless, overall this year�s Maha crop was less affected by water shortage than in the previous year and an estimated 477 000 hectares were harvested, some 9 percent more than 1995/96.

Yala 1997 - The 1997 target for Yala production is 334,000 hectares. Generally, the Southwest monsoon produces less precipitation than the Northeast monsoon and the Yala crop, therefore, is even more dependent on irrigation water than the Maha crop. On the basis of observed water levels in reservoirs and tanks, the Mission estimates that this year�s target will not be met and forecasts that planted area will only cover 257 000 hectares, some 8 percent above 1996 Yala area.

3.1.2 Paddy Yields

Maha 1996/97 - Overall, a paddy yield of 3.3 tons/ha. was achieved compared to 3.1 tons/ha last year when the crop had been more seriously affected by drought. In major irrigation schemes, water supply was assured. This together with better cultural practices, meant that relatively high yields [in the order of 3.9 tons/ha] were achieved. However, under rainfed conditions the crop suffered moisture stress during important stages of growth resulting in yields of around 2.6 tons/ha. Average yield on minor irrigation schemes were estimated at 3.2 tons/ha.

Yala 1997 - The average yield for the 1997 Yala crop is projected at 3.3 tons/ha similar to Maha. The Yala yields are generally higher than in Maha, due to better sunshine and greater use of fertilizer in areas where water is not a limiting factor. Since irrigation supplies will be a constraint during the coming Yala season, it is assumed that only suitable areas with adequate irrigation water availability will be cultivated and that the expected yield will be around 3.3 tons/ha.

3.1.3 Paddy Production

Maha 1996/97 - Based on the area harvested and estimated yields total production is estimated at 1 601 624 tons. (Table 1)

Yala 1997 - Production is projected at 855 000 tons. (Table 2)

Overall paddy production will, therefore, total 2 457 050 tons in 1996/97, some 22 percent above last year�s drought reduced crop, though 4 percent below average for the preceding five years.

3.2 Other Food Crops

A wide variety of food crops other than rice are either grown in small parcels on rice lands as secondary crops or on high land areas as primary crops. Maize, millet, green gram and cowpeas are largely used as supplementary diet with rice or wheat as staple food. These four main food crops cover, annually, around 80 000 hectares with production estimated at around 75 000 tons. In addition, tubers (cassava and potatoes) and vegetables are also grown and consumed in large amounts. Annually, 22 000-25 000 hectares are planted to roots and tubers crops with a production of about 200 000 tons. Amongst the vegetables, green chillies and red onion are the most important cash crops and are grown on 20 000 and 4 000 hectares with a production of 50 000 tons and 25 000 tons, respectively. Both green chillies and red onions are important cash crops for farmers in the northern districts. Income from cash crops is important to purchase rice and other foods. Both area and production of chillies and red onions are estimated to have decreased drastically as a result of civil strife.

4. FOOD SUPPLY SITUATION

4.1 Food Supply/Demand Analysis

Sri Lanka remains a net food importing country. Wheat is entirely imported and rice is imported when there is shortfall in domestic production. Subject to 35 percent duty, the import of rice is completely liberalized. In practice, a "Bondsmen Scheme" is operated which allows Bondsmen to import rice into the country without paying duty until it is actually released into the domestic market from bonded warehouses. The Bondsmen are allowed to keep any quantity of rice in bond and to re-export if necessary without having to pay the duty. However, in return these Bondsmen are required to maintain a rice buffer stock at all times which collectively amounts to one month�s requirement.

Table 1 - SRI LANKA: Estimated Paddy Production - Maha Season 1996/97 1/

Table 2 - SRI LANKA: Estimated Paddy Production - Yala Season 1997 1/

1/:Mission calculation based on:
- information on area harvested and expected yield provided by the Division of Agriculture in the Districts visited resp. contacted by the Mission
- average area harvested and average yield for the last years, as reportd by the Department of Census and Statistics, for those Districts not visited by the Mission

Rice and wheat are the basic food staples, providing some 60 percent of total energy intake. During 1993, rice accounted for 74 percent of cereal consumption, though its share declined to 69 percent in 1994 and to 63 percent in 1995 and 1996. The share of wheat flour consumed increased correspondingly from 26 percent to 37 percent. Wheat is not produced domestically and has been regularly imported. In the period 1985-1992, an average of around 680 000 tons were imported. However, since 1993 imports have increased reaching 1 107 000 tons in 1995 and 912 000 tons in 1996. Until 1994, domestic wheat flour prices were set to cover full costs, but as prices were heavily subsidized in subsequent years consumption increased from about 31 kg per caput in 1991-93 to 34 kg in 1994 and to 41 kg in 1995, along with a decline in per caput consumption of rice. In November 1995, the price of wheat flour was raised to its 1994 level of 12 Rupees per kg which still meant a subsidy of 9 Rupees per kilogramme. In March this year, the sale price of wheat flour was 17.40 Rupees per kilogramme and the current subsidy amounts to 4.0 Rupees per kilogramme.

Although rice self-sufficiency has been a goal for many years, rice is still regularly imported. The per caput target for rice consumption is 104 kg. However based on the quantity imported in recent years, together with the growing availability of wheat (bread) and other food crops, the Mission estimates yearly per caput consumption at 96 kg.

In deriving the cereal balance sheet for 1996/97, the Mission used the following estimates and assumptions:

• A mid year population of 18.516 million in 1997.
• Per caput rice and wheat consumption of 96 kg/year and 48 kg/year respectively.
• A milling rate of 66 percent from paddy to rice.
• For rice 8 percent for post-harvest losses, 5 percent for seed and feed and 2 percent for other uses. For wheat, other uses are estimated at 90 000 tons.
• Opening stocks of 60 000 tons of rice and 105 000 tons of wheat, in line with data from the Department of the Food Commissioner.
• Closing stocks of 148 000 tons of rice and 50 000 tons of wheat (one months average consumption requirements) as the minimum required for supply stability.

Sri Lanka: Cereal balance sheet for 1996/97 (�000 tons)¹

^{1 The cereal balance does not include other minor cereals such as maize.
2 Includes some concessional imports (55 000 tons) in wheat.}

The overall import requirement for rice and wheat in 1997 is estimated at 488 000 tons and 900 000 tons respectively, most of which is expected to be imported commercially.

Farmers normally retain a quantity of rice at harvest to meet household consumption requirements, with any surplus being marketed. In 1996/97, however, farmers who can normally count on two paddy harvests per year, will retain a higher quantity from this year�s Maha crop than usual, as they anticipate a markedly reduced Yala crop due to low irrigation reserves. This means that those farmers who have harvested their Maha crop, albeit a reduced crop compared with normally expected outputs, will still be able to cover their own rice consumption requirements. The overall reduction in this year�s rice crop will lead to a situation where less rice is available in markets from local production. The shortfall will, therefore, need to be made up through imports. In the absence of adequate flows of imports, however, price may increase substantially as in 1996. To encourage the flow of rice imports the office of the Food Commissioner is proposing a reduction in import duty [The import duty on rice was already removed from 15 April 1996 to 31 January 1997 in view of the decline in paddy production in 1995/96.] .

For sections of the population that do not have sufficient means to meet food requirements, the government has implemented welfare programmes. The most recent of these are the "Janasaviya" programme in 1989 and the "Samurdhi" programme initiated by the present government in 1995/96, which is replacing the "Janasaviya" programme. Under this programme, the most vulnerable families are given an income transfer of Rs. 1 000 per family, while other poor families are given Rs. 500. The programme also provides Rs. 100 for single member families and Rs. 200 per month for 2-member families. In 1995, a total of 1.1 million poor families received "Samurdhi" benefit. Providing the aid in monetary terms (instead of direct food transfer) prevents the Government from getting involved in cumbersome and inevitably costly food distribution operations and leaves to the beneficiaries the choice of food according to their preferences. However, the programme is a heavy burden on the Government budget and the international donor community may consider alleviating this burden by providing a certain amount of programme food aid.

4.2 Food Aid Needs in the Northern Districts

The mission was able to visit Vavuniya and to have discussions with government officials from Jaffna, Mullaitivu and Vavuniya. Some information regarding the food supply situation in the five northern districts of Jaffna, Vavuniya (North), Mannar, Kilinochchi and Mullaittivu was therefore obtained; however, the total number of people living in northern districts is unclear as a result of loss of life, population displacement and emigration.

According to the Registrar General, some 1.4 million people should have been living in the area in mid-1996, under the assumption that the normal pattern of population growth was applicable. The Mission has noted the deliberations of a Committee which was set up in October 1996 to review the population issue and also discussed the matter with Government officials. Based on these discussions, the Mission estimates that there will be some 929 000 people in these districts by mid-1997, taking into account that some 50 000 people may return to their original locations in the Jaffna Peninsula.

Estimated mid-1997 Population in Northern Districts (�000)

It is thought that these numbers include a portion of the 410 000 displaced persons who are reported to be either residing in camps or living with relatives and/or friends. The Ministry of Shipping, Ports Rehabilitation and Reconstruction reports that by end January 1997, some 625 000 people were benefiting from government assistance in the five districts. During 1996, the Ministry responsible delivered some 91 000 tons (at an average 7 600 tons per month) of food and other essential items to the Northern area. In addition, a small number of NGOs have also been able to supply such goods to their respective project areas, sometimes under the auspices of the UNHCR which is maintaining an office in Vavuniya the main entrance point to the Northern area.

Government food convoy lorries leave from Vavuniya to Santhasolai in the cleared area where they are unloaded and checked by the security personnel. After checking, the goods are loaded into other lorries coming from the uncleared area further north and these lorries then proceed to the uncleared areas. These operations are co-ordinated by the office of the Government Agent in Vavuniya with the Sri Lanka Army and representatives of the Government Agents of the other districts concerned

Based on available information it would appear that about 700 000 people are still engaged in economic activities in the north, particularly farming, which, under normal conditions, would provide for their own livelihoods. But they have now been affected to varying degrees in two ways: (a) military operations have prevented them from cultivating their fields in a normal way; a large part of the cultivable area could not be cultivated and normal field work has often been interrupted; (b) the below average and erratic rainfall in two consecutive years has also limited the area cultivated and has severely affected the outputs where paddy had been sown, in some cases resulting in a complete loss of the crop.

The Mission noted that there was a flow of agricultural products and other items on the road between north and south and vice versa, but the presence of various military/security checkpoints was causing difficulties and delays resulting in fairly high transport costs. It was learnt that at some main checkpoints each truck-load is off-loaded, checked and re-loaded to move again.

To the extent possible the situation is continuously monitored by FAO and WFP and should the security situation improve in these areas it is possible that WFP assistance would be requested. Such interventions could be in partnership with international NGOs. WFP�s consideration of a government request would be contingent on: i) the ability to conduct independent needs assessment in the areas where assistance is requested; ii) a sufficient level of access and security for WFP staff and food assistance; iii) the effectiveness of civilian implementation partners; and iv) the adequacy of logistics, distribution, monitoring and evaluation mechanisms.