By: Staff Writer
December 15, Colombo (LNW): Sri Lanka faces a mounting crisis in its rice sector, driven by high taxes, supply chain inefficiencies, and government intervention.
Currently, rice imports are taxed at approximately $222 per ton, a figure significantly higher than international export prices, particularly for South Asian rice grades.
This policy has inflated domestic rice prices, contributing to food insecurity and economic strain on Sri Lankan families.
Government Regulations and Market Realities
Despite setting maximum prices for both local and imported rice, the government has struggled to enforce these limits. A December 2024 gazette notification by the Consumer Affairs
Authority (CAA) capped retail prices: are Local white and red raw rice: Rs. 220/kg, Local Nadu rice: Rs. 230/kg, imported raw rice: Rs. 210/kg, Imported Nadu and Samba rice: Rs. 220 and Rs. 230/kg, respectively
However, rice prices in the market often exceed these regulated rates, as supply shortages persist. Stakeholders accuse millers of hoarding rice, further exacerbating the issue.
The Decline of Marandagahamula: Sri Lanka’s Largest Rice Market
Marandagahamula, once the country’s largest rice trading hub, has experienced a sharp decline. This market, sustained primarily by small-scale millers who process paddy from regions like Anuradhapura and Hambantota, no longer hosts the major traders who once defined its operations. Villagers now describe it as a market on the brink of collapse.
Import Challenges and Policy Shortcomings
In an attempt to curb domestic shortages, Sri Lanka temporarily relaxed its rice import licensing until December 20, 2024. However, the hefty import tax of $220 per ton—nearly a 50% duty—remains a significant barrier.
Compounding this issue, Sri Lanka Customs recently flagged defective shipments, including tampered labels and infestations, which resulted in the re-export or confiscation of nearly 75,000 kilograms of rice.
To address the crisis, private importers began bringing in rice on December 4, primarily from India. By mid-December, approximately 2,300 metric tons of rice had cleared customs. Yet, even these measures appear insufficient to stabilize the market.
Economic Nationalism: The Impact on Families
High taxes on essential cereals like rice and maize have had a cascading effect on food affordability.
For instance, taxes on maize—except for the nutritional supplement Thriposha—have made proteins like chicken and eggs some of the most expensive in the world.
Similarly, taxes on grains like green gram have further limited access to protein-rich diets, exacerbating malnutrition, particularly among children.
This approach to economic nationalism, rooted in protecting politically powerful agricultural lobbies, has drawn sharp criticism. The government’s reluctance to eliminate cereal taxes even during the 2022 economic crisis highlights its prioritization of political interests over food security.
A Historical Perspective on Food Taxes
The rice crisis in Sri Lanka echoes historical lessons, such as Karl Marx’s condemnation of protective tariffs on grains.
Marx, an advocate of free trade despite his critiques of capitalism, argued that such taxes exploit the poor by inflating food prices. His sentiment resonates in Sri Lanka today, where high taxes on rice, maize, and potatoes disproportionately impact the most vulnerable populations.
The Path Forward
While the relaxation of import licensing is a step forward, the persistence of high taxes undermines efforts to alleviate food insecurity.
Without comprehensive reforms to reduce import taxes and address supply chain inefficiencies, Sri Lanka’s rice crisis will likely continue, deepening the struggles of its poorest citizens and threatening long-term economic stability.
