A right Royal debacle – Part 2

Strategy Options for the Sector

 Acceptance on the fundamentals of becoming organised and creating a co-
operative/public company structure by the farming community. This will
necessitate developing leadership and support for the organisations
 Educating and creating awareness among the rice farmer why he/she
should take charge of the rice chain
 Creation of the optimal legal structure to ensure key ownership and benefit
of the rice trade remains with the farming community
 Financial support initially based on non-commercial or subsidised terms
from those multilateral lending agencies who claim that their desire is to
uplift the poor masses in developing countries
 Take and develop ownership of milling, storing, packaging facilities, and
perhaps also the ownership of logistics
  Develop branding, distribution and marketing, through own outlets, other
wholesalers/retailer and supermarket chains
 Development of effective payment mechanisms
 Adopting leading edge information and communication technology (ICT)
solutions to support effective overall management practices
 Gradual and systematic upgrading of quality, varieties and volume of rice of
rice produced with export markets in vision
 Development of supplementary crops and land use to optimize use of
marginal lands not suitable for rice for other crops such as vegetables etc

Driving the agenda

Thursday, 15 February 2018

The starting point will be creating and nominating central organising committees
based on growing areas/regions with representation from across the rice farming
community of those areas/regions in the country.
The members of these committees will be tasked with educating and creating
awareness among the rice farmer on why the initiative of co-operation and
asserting ownership makes sense. This will include:
 Secure necessary funding to establish and organise
 Defining the optimal legal structure
 Defining the requirements and benefits of owning the value chain
 Develop audio visual programs explaining the merits of this model, the
benefits and what it will do for their living standards
 Train resource personnel to educate, communicate and get buy-in from the
farmers
 Demarcate the main rice growing areas on a set of principles
 Define the current sector in a research based study across the country
Creating support
 Present the business case to the multi-lateral donors. The stated mission
and objectives of bodies such as World Bank too states that they are there
to help people help themselves. The WB Mission Statement states: “WB
group aims to fight poverty with passion and professionalism for lasting
results – to help people help themselves and their environments by
producing resources, sharing knowledge, building capacity, and forging
partnerships in the public and private sector”. Also the newly-established
BRICS Development Bank objective is to provide development funding in
BRICS group and developing nations.
 Quantification of the current production volumes based on the growing
regions for assessments of the desired critical mass for the creation of the
units and necessary structures
 Agree upon the financing modalities
 Work with the organisations in building food security plans
Use of funds
 State-of-the-art milling facilities based on density of growing, ease of
access, transport facilities etc. Consideration must be given to the present
millers and how they could compliment the process
 Proper storing facilities such as silos for storage of paddy and rice as well as
vegetables and fruits
 Packaging facilities enabling creation of own brand/s
 Transport and other logistics support, both own and ability to secure third
party services at competitive rates

Distribution and marketing

 Branding of rice products
  Develop other rice based products such as rice flour, breakfast cereals, rice
flour based products
 Research on product development such as rice flour bread, biscuits etc.
 Pricing and revenue management strategies
 Develop own retail/wholesale outlets
 Promote to optimise use of rice and rice based products

Transportation strategy

In the vegetable sector, it is a well-known fact that due to crude packaging and
transport strategies large quantities of vegetables perish. In 2013, the previous
government tried to bring in a policy of packing in baskets when transporting as
opposed to gunny bags with disastrous results.

The failure of the initiative was solely due to the inability of authorities to
understand the principle of the rights of the people and absence of choice. What
the then Trade Ministry people should have done was to give a choice and leave
the transporter to decide based on mutual benefits.

With the farmer community being in charge of the whole sector as opposed to
middlemen and to increase the yield in the utilisation of vegetables, it is proposed
that a twofold approach be adopted. Namely,

1. The current practice of using gunny bags for transporting vegetables

2.Use of baskets to transport vegetables

3.Those transporters who select the option of baskets to be provided with baskets
at a concessional price, facilities to transport the empty boxes back to base by rail
at a very nominal rate, reduction in the annual revenue license fee and
concessions in import duty when importing new trucks

4.Those who opt to use the old gunny bag model of transportation will not
receive duty concessions for new truck imports

Revenue management in rice

The fundamental in revenue management of perishable assets is the revenue

opportunity cost of the next unit of inventory or EMR (Expected Marginal
Revenue). EMR is the probability of selling the next unit of inventory. If the
probability is low, then the end consumer price too will be low. In the rice market,
with bumper harvests there will inevitably be pressure on the end consumer price
of rice. While the consumer is benefited, the drawback will be the downward
pressure on the price of paddy at the farm gate which will eventually result in
cutback in the farming acreage in the next season.

Unlike in the case of fixed inventory capacity such as airlines, hotels, cruise liners,
where the inventory subordinate table is built taking into account the market
segmentation for optimisation of revenue (unless utilised at the time of departure
or on the day of occupation the inventory will perish) the same cannot be applied
in the case of commodities such as rice or vegetables where the marginal unit
could determine the price if overproduced.

Therefore, strategic plans need to be in place to ensure there is optimal

production with the farmer obtaining a better price, without exploiting the
consumer. Some of the strategies could be,
 Based on research findings, work out the acreage to be farmed for local
consumption
 Incremental acreage to be farmed with high value varieties with local
discerning upmarket segments and export markets in view
 Product development – rice flour, rice breakfast cereals, rice sweets, rice
based bread, rice based noodles etc. Product differentiation and creating
new products to existing markets as well as new markets will enable to
increase the EMR of the marginal unit
  Undertake research to develop new products with both local market and
export markets in view
 The need for inter-regional competition to ensure that while the farmer
enjoys the benefits, that the consumer too is not disadvantaged and has
choice of quality and price in which to choose from
 Proper storage facilities where rice, onions, vegetables will not perish as
now

Developing an optimal income management process

This will likely be a combination of guaranteed prices for products supplied plus
distribution of dividends at agreed intervals throughout the year. Within the
structure, the new organisations may decide to set aside funds annually to
establish and create an effective pension fund/EPF for the members.

Over time, the financial strength of the organisation should be such that it will be
in position to provide financing to the members on preferential terms to that of
banks and current financial businesses.

Further, after a tax holiday period, the organisations could be taxed on their
profits generating income to the Government.

Developing an Information & Communication Technology Strategy – ICT

There is need for the organisations to develop rice and other allied products
commerce data. The new organisations may wish to consider making use of
already existing resources within the community or develop their own resource
centres for upkeep of all data.
 Computer resource centres to create and maintain all commerce data
 Maintain all production, consumption, export data, and build database
which could be used to forecast future consumption patterns and use that
 data to plan growing rice, other allied products, new product development
etc.
 Develop marketing data with consumer segmentation, consumer needs and
wants etc.

Innovation, research and development

The new organisations will adopt a gradual and systematic process of

implementing research and acquiring new knowledge to upgrade the rice crop in
respect of quality, varieties, and volumes. This will include;
 Optimisation of production from existing acreage
 New land cultivation
 New varieties including those with export potential as well as varieties
capable of increasing yield. Importance should be given to the growing of
our traditional varieties of rice which are far more beneficial in terms of
health and more resistant to insects than the hybrid paddy
 Optimising land use by utilising marginal lands and extending the activities
of the new organisations to non-rice areas
 Source markets local and international and develop new products
There are a number of other areas where the new organisations can play an
important role. This could include provision of farming experts to help increase
production in underperforming regions and ensuring effective water
management.

The activities of the new organisations could well develop to buying beyond the
production of its members. Further the organisations will need to have the
infrastructure in place to deal with disputes, issues, and problems within the
farming community and its members.

Further, after an initial gestation period, the organisations could be quoted in the
stock exchange with members being allowed to sell a certain percentage of their
shares in the exchange.

Let the whole nation open its eyes and see the plight of farmers. Like the birds
being freed from a net, let us free the farmers from the net of poverty,
unhappiness, and debt, so that they reach the destination of peace and
happiness; because their happiness will be the nation’s happiness.

Food security

All agricultural strategies in all sectors will have little impact if focus is not
directed to food security. In the developed world, food security is part of the
national agenda. Japan is a good example where due to influence of the rice
farmer, rice imports are banned except in processed forms. Rice production is
also subsidised by the government which aggravated trade friction between Japan
and USA. The Japanese position is that self-sufficiency in rice production is
important for food security.

The EU is another good example of how food security is seen by the community.
In fact, all developed nations have food security at the highest importance in
national development. By building the economic strength of the farming
community, Sri Lanka can create food security and ensure that the fleecing of the
consumer by the middlemen will not take place.

The meeting chaired by the Minister for Food Security on 16 January was one
good example. Viewers heard firsthand how officials in various sectors under the
ministry spoke of the misdeeds of the past and how B-onions, in millions of kilos,
perished in the warehouses.

Corrupt officials and the middlemen will never allow the Government to
implement food security under the present structure. Indeed, on the following
day, the minister informed the IGP to seal a warehouse of CWE in Colombo
pending investigations.

By empowering the farmers in all sectors of agriculture, the Government will be

easily able to implement the food security plans. A satisfied society of farmers
who are the primary producers and that of the end consumers will mean great
harmony and peace to all. That peace will lead to ultimate prosperity for all in our
motherland.

Indeed, in the Paththakamma Sutra, the Enlightened One extolled the lay people
to do the five giving or Pancha Bali. One of which is Athithi Bali or doing service to
others and caring for those who seek help/service (It may be noted that long
before the marketers coined the phrase ‘Customer Relationship Management
(CRM)’, Lord Buddha had spoken of the virtue of service).

(The writer can be reached at sugathra@airindia.indusky.lk or

Sugath_ras@sltnet.lk)
Posted by Thavam