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Tuesday, 14 February 2012

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Domestic agriculture and future challenges


A shorter version of a paper presented by Prof. A D V De S Indraratna at an International Seminar in China in 2011




Prof. A D V De S Indraratna

After Sri Lanka obtained political independence from the British in 1948, and prices of cash crops had begun to fall relatively to those of consumer imports (Prebisch,1950), the governments of Sri Lanka began to pay greater attention to domestic agriculture of rice and subsidiary food crops, for subsistence, while the plantation agriculture was sustained mainly for export.

The agriculture economy of Sri Lanka thus had fallen into two subsectors: the import competing food economy dominated by rice but including other subsidiary food crops as well and the export sector comprising tea, rubber and coconut (including as well minor export crops, mainly spices). Very often, the latter is referred to as plantation agriculture while the former is classified as the non-plantation or domestic agriculture. Coconut can no longer be treated as an export crop because more than 90 percent of it is now used for domestic consumption Forestry, fishing and livestock not included under either plantation or non-plantation agriculture also belongs to the sector of agriculture.

The agriculture which was the main stay of the Sri Lankan economy in the 50’s, in the immediate aftermath of Independence, has gone through several stages of transition before becoming what it is today. It is noteworthy that the contribution of agriculture to GDP, total employment and total exports which were respectively near 50 percent, 53 percent and more than 90 percent had come down to 12 percent, 33 percent and less than 20 percent respectively. What is even more noteworthy here is that despite the share of agriculture's contribution to GDP falling below 15 percent, the percentage of country's total employment engaged in agriculture is 33 percent, more than twice as much.

Furthermore, three fourths of the country’s 20 million people still live in rural areas including tea and rubber estates, the majority of whom are dependent on agriculture or its ancillary work for their livelihood. The bulk of these rural people also belongs to the estimated 40 percent poor who are below the poverty line of US $ 2.00 (ppp) per day.

The major significance of agriculture herein lies in the fact that without removing the surplus labour in that sector and improving its productivity, it will not be easy to alleviate poverty. It is by increasing the real incomes of this mass of poor people that it is possible to raise the demand for goods and services from other sectors as well, and enhance the overall economic growth of the country. In this context, Sri Lanka has a lot to learn from the past experience in high performing economies of East Asia, such as South Korea, Taiwan and Japan (and the more recent experience of the People's Republic of China (PRC).

Surplus labour

The domestic agriculture, which is the focus of discussion in this paper, is characterized by low productivity. Low productivity is structurally, largely due to surplus labour, insecurity of land tenure and landlessness and uneconomic land holdings.

The evidence for the existence of surplus labour is not far to seek. The contribution to GDP by agriculture engaging as much as 1/3 of the total employment of the country is only 12.5 percent or 1/8. The surplus labour on agricultural land has, in fact, increased over the years. Agriculture which had contributed nearly 50 percent of the GDP engaged a little more than 50 percent of the total employment, whereas now, 12.5 percent of the country's GDP contributed by agriculture engages as much as 33 percent of total employment.

Insecurity of tenure

The insecurity of land tenure, the second cause of low productivity, arises due to two main reasons. One is the lack of ownership of land. Most of the farmers used to cultivate the land not owned by them on the basis of what is known as Ande System (a primitive tenancy system). Under this system, until December 1957, the tenant farmer got one fourth of the share of the harvest while the land owner got three fourths of it.

This offered hardly any incentive to the farmer to put in his best effort to maximize productivity of the land which he used to cultivate. In December 1957, the Minister of Agriculture in the then MEP Government headed by the late Mr. S W R D Bandaranaike foresaw the absolute need to change this system in order to increase the lot of the poor farmer as well as the productivity of agriculture as a whole. He introduced and passed in Parliament the legislation called the Paddy Lands Bill, by which the existing shares between the tenant and the landlord were reversed by prescribing three fourths of the share of the harvest to the tenant farmer.

Landlessness

By this same legislation another system of land tenure, called Thattumaru (alternating cultivation) which was also militating against increase in productivity was also abolished. After the fall of the MEP Government, these tenurial reforms were observed more in the breach.

The other reason for insecurity of land tenure has been the lack of title deeds to prove the ownership of the land possessed by many farmers. This has not enabled them to obtain the much needed agricultural credit from banks and other credit institutions by hypothecating the land, their only asset or possession. In the early A project by the name of Land Titling implemented in the first years of this century it was not pursued by the successive ministers of lands. Landlessness has been an acute problem in Sri Lanka's agriculture. Of the 66,600 square kilometers of the total land surface, only about 15 percent constitutes the arable area. Of this also the bulk belongs to the state. The land shortage has been more acute in the Wet Zone, (the south western quadrant of the Island) than in the north eastern Dry Zone where cultivation is more by irrigation than rain-fed. In the late 1940s, the government attempted to ease the land pressure in the Wet Zone and create a land owning farmer community in the Dry Zone by allotting government land to them in the latter. Such land settlement schemes as Gal Oya launched by the then Minister of Agriculture and Lands of the Board of Ministers, the late D S Senanayake who became the first Prime Minister of independent Sri Lanka, were erroneously referred to as Land Colonization Schemes by those who opposed them

The Land Development Ordinance, under which this scheme was operated, allotted five acres of low land and two acres of highland (later reduced to three acres and one acre respectively)to each of the allottees selected from the land-scarce Wet Zone and settled in the North East Dry Zone. As there was no anti fragmentation law operating, these holdings were subjected to fragmentation several times over the years, due to passing down from one generation to another on inheritance or illegal sale to outsiders in parceled-out lots, and have become uneconomic holdings.

The original primary objective of this scheme was to ease the land pressure in the South West of the country and alleviate the ‘hunger for land’ of the landless. Though this objective would have been somewhat achieved, it has not helped to create viable economic holdings of cultivable land. As explained earlier, the next land reform, ten years later with the introduction of the Paddy Lands Bill, end of 1957, did not help to prevent fragmentation of land but only to somewhat improve security of tenure of the tenant farmer. Even the Kobbekaduwa Land Reform which came into force 15 years later in 1972, instead of helping consolidation of land for scale economies, led to further fragmentation of existing large holdings (or estates).

Uneconomic holdings

The problem of landlessness in domestic agriculture, as has been described above, has been exacerbated by the characteristic uneconomic holdings of rice and coconut lands due to fragmentation that has been allowed to go on, until recently. 97.3 percent of the total number of holdings with a total extent of 1,218,036 acres or 493, 382 hectares is less than 5 acres/2 hectares in size. If 5 acres or 2 hectares is considered an economic holding or viable size, all except 2.7 percent are uneconomic holdings. The situation in regard to coconut is better. 30 per cent of coconut lands were more than 2 hectares or 5 acres in size and less than half (43.5 percent ) of the coconut lands were less than 1 hectare or 2 1/2 acres in size. This was the picture in 2002 as estimated in the 2002 Agricultural Census. No census has been done since then. Since fragmentation has been continuing uninterruptedly for housing and other non agricultural purposes, the situation must have got much worse than ten years earlier.

To be continued

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