- Contributes the least to GDP
- About 50% of subsidy benefits go to the richest 20%
Steps should be taken to modernise the Sri Lankan agriculture sector which is still mostly operating in a traditional manner, observed Verite Research non-resident fellow Prof. Shanta Devarajan at a seminar in Colombo last week.
“The sector contributes the least to GDP and agricultural productivity has hardly grown.” The overwhelming share of farm households produce paddy which is almost 50 percent. Paddy used to be the least productive crop of all the possible crops that gives you the distribution of productivity.
“Furthermore, paddy is the least lucrative crop in terms of rupees and output per acre; paddy is one of the lowest.All these other crops are much more valuable.”
The farmers are staying poor because of the fact that paddy is not a lucrative enterprise. “This occurs due to the paddy lands act of 1958 that requires farmers to grow paddy in these lands. They are obligated to grow paddy and a whole bunch of other policies that are only geared towards farmers to grow paddy. This needs to change. We cannot continue to keep these farmers impoverished by forcing them to grow paddy. This is unacceptable. The policy recommendation is to make these farmers accountable to markets, not the government. Let them compete in the markets and grow whatever they want,” Devarajan said.
He also denounced subsidies which often benefit the richest people and suggested targeted cash transactions instead. “In Sri Lanka, it has been estimated 70% of the subsidies go to the richest 30% of the population. Now if this was a cash transfer programme, they give 70% to the richest 30% you take it to win right now.”
About 50% of subsidy benefits go to the richest 20%. That’s the average across these countries. The amount that goes to the poor people is around 5%.
“What we are doing is embarking on a programme to subsidize the rich,” he said.
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