The coming months may mark the beginning of a significant shift in Sri Lanka’s rice economy, as the National People’s Power (NPP) Government takes bold steps to reshape the sector.
The country’s rice milling industry has evolved into an oligopoly, with a few large-scale players—such as Araliya and New Rathna—controlling a significant share of the market. Reports indicate that these millers now dominate approximately 60 percent of the sector, a sharp increase from previous years.
Severe consequences
The consequences of this market concentration have been severe. Over the past decade, nearly 10,000 small and medium-scale rice mills have shut down, leaving only about 700 still in operation. The decline has not only forced mill owners out of business but has also disrupted livelihoods across the entire rice production chain.
In response to these monopolistic challenges, the Government has taken steps to stabilise the rice market. The Government was compelled to import 70,000 metric tons of rice to address the scarcity and to ensure the continued supply to consumers.
On February 5, 2025, Minister of Agriculture, K.D. Lal Kantha and Deputy Minister Namal Karunaratne said that farmers in the country will no longer be compelled to sell their harvests for less than Rs. 120 per kilogram for Nadu paddy, Rs. 125 for Samba paddy and Rs. 132 for Keeri Samba paddy. These measures are aimed at ensuring fair compensation for farmers while stabilising the rice market.
This decision has far-reaching implications, marking the highest price ever offered to rice paddy by a Government. Following instructions from President Anura Kumara Dissanayake the Paddy Marketing Board(PMB) has begun buying paddy at the new rates to create a stable and equitable environment for farmers and consumers.
Socio-Economic and Planning Director at the Agriculture Department and a key member of the committee that reviewed the certified paddy price, Dr. Chamila Chandrasiri sheds light on the true cost of rice cultivation this Maha season.
According to Dr. Chandrasiri, the production cost per acre of Nadu paddy is between Rs. 150,000 and Rs. 160,000. Nadu, known for its high yield remains the most productive variety, followed by Samba and Keeri Samba in descending order.
The committee’s scientific estimate for various types of paddy for this Maha harvesting season is as follows: White Nadu paddy at Rs. 91, Red Nadu at Rs. 76, Samba at Rs. 99, and Keeri Samba at Rs. 108.
Additional Secretary, Agriculture Development and fellow committee member, Disna Rajasinghe said when setting the paddy purchasing price, the committee took into account not only production costs but also the goal of lifting the quality of life of farmer families—particularly those cultivating over 2.5 acres of paddy—out of poverty.
Rice mudalalis
However, while the Government moves to support farmers, some large-scale private companies and mill owners are also active in the market, purchasing paddy at prices above the Government-stipulated rates. These well-established ‘rice mudalalis’ who have been in the business for decades, know how to manipulate the market.
Agriculture Minister Lal Kantha, however, expressed the Government’s commitment to ensuring benefit to the farmer. He commended farmers selling their paddy to the PMB which will help stabilise the market and create a more balanced environment for producers and consumers.
Lal Kantha said that farmer organisations had proposed issuing receipts to those selling paddy to the PMB. This would enable the authorities to exclude farmers who sell outside the Government system from receiving subsidies, such as fertiliser assistance. However, the Minister dismissed the proposal, reaffirming the Government’s commitment to safeguard farmer interests.
“When the PMB takes steps for the people, farmers who benefit from public subsidies also have a responsibility to society,” he said.
Critical phase
As Sri Lanka embarks on this critical phase of its rice economy, the link between Government policy, market forces and the power of private interests will likely continue to shape the future of the country’s agricultural landscape. The NPP administration’s approach may be a turning point, but it will require constant vigilance and balance to ensure that the benefits reach those who need it most—the farmers and the consumers.
The Government has revitalised the PMB to play a pivotal role in rice distribution and market stabilisation. The previously inactive and burdened PMB with a debt of Rs. 28 billion will now play a crucial role in directly purchasing paddy from farmers at guaranteed prices in the wake of directives issued by President Dissanayake to strengthen the PMB by upgrading paddy storage facilities and involving small-scale millers in rice production.
The PMB is now purchasing paddy directly from farmers at guaranteed prices to eliminate market inefficiencies and reduce the influence of large-scale millers. For the 2024–25 Maha season, the Government plans to procure between 300,000 and 400,000 metric tons of paddy for processing and distribution through its cooperative networks such as the Sathosa.
The Government aims to cultivate 1.3 million hectares during the Yala and Maha seasons to boost annual rice production.
The country’s daily rice consumption stands at 6,500 metric tons. The PMB’s recent intervention led to the purchase of just 119 metric tons of Keeri Samba rice in the last season.
A key challenge is storage capacity. Expanding PMB warehouses to hold up to 400,000 metric tons through renovation could significantly enhance stock management and price stabilisation efforts. By improving storage infrastructure, the Government could play a stronger role in regulating supply and protecting the farmer and the consumer from market volatility.
Prevent monopolistic practices
In December 2024, the Government set a maximum retail price for rice to ensure affordability for consumers. The Consumer Affairs Authority (CAA) was tasked with monitoring compliance and taking legal action against non-compliant rice mill owners. The Government provided low-interest bank loans to traders to purchase paddy to encourage fair competition and prevent monopolistic practices. The CAA was instructed to closely monitor daily rice production and distribution by mills, ensuring adherence to regulations and preventing price manipulation.
CAA Chairman, Hemantha Samarakoon said that the CAA had found several companies and rice traders purchasing paddy from farmers at prices above the Government stipulated price. He acknowledged that while these traders may be paying higher prices for paddy, the CAA will strictly enforce regulations during the festive months of March and April.
The CAA in a Gazette notification issued last December has set a maximum retail price for locally produced and imported rice.
Locally produced white and red raw rice are capped at Rs. 220 per kilogram, Nadu rice at Rs. 230 and Keeri Samba at Rs. 260 under the new price control.
For imported rice, the maximum prices are set at Rs. 210 per kilogram for raw rice, Rs. 220 for Nadu, and Rs. 230 for Samba.
Since January 1, the CAA has conducted 2,700 raids, 800 of which were related to rice-related offences. Of these, 300 cases involved the sale of rice above the stipulated price, Samarakoon said.
Fines for selling above stipulated price
Private retailers found selling rice above the stipulated price face fines ranging from Rs 100,000 to Rs 500,000, along with a six-month prison sentence or both. In the case of a private company, fines could range from Rs 500,000 to Rs 5 million. Since January 1, the CAA has collected Rs 37 million in fines from the Courts for such violations, Samarakoon said.
The Hector Kobbekaduwa Agrarian Research and Training Institute Director and CEO, Prof. A.L Sandika said the Government has provided subsidies on certain inputs such as fertiliser and seeds to reduce the financial burden on farmers. These subsidies are intended to lower the overall cost of production, especially for small-scale farmers. The Government spent Rs 5 on each kilogram of paddy by providing the fertiliser subsidy, he said.
The new Government has introduced several initiatives to support farmers, focusing on financial assistance and resource provision. It raised the fertiliser subsidy from Rs. 15,000 to Rs. 25,000 per hectare for the 2024 to 2025 Maha season, This subsidy is disbursed in two installments: Rs. 15,000 initially, followed by Rs.10,000.
To ensure timely and efficient delivery, the subsidy funds are directly transferred to farmers’ bank accounts.
In addition to the monetary subsidy, the Government provided free red powder fertiliser to paddy farmers during the Maha season. It revived the ‘Sarusara’ Rural Credit Scheme’ to offer working capital assistance to small-scale farmers to empower rural communities and bolster agricultural development.
Through institutions such as the Bank of Ceylon and the Sri Lanka Agricultural Development Bank, the Government provides low-interest loans or grants to farmers to help cover expenses such as land preparation, seed procurement, and purchasing machinery.
Officials of the Agriculture Ministry say the revival of the PMB is crucial for small and medium-scale millers, many of whom have struggled with mounting debt and closures.
With renewed support for the PMB, many hope it will bring much-needed stability to an industry that remains essential to the nation’s food security.
