Countries of the World/COUNTRYS.BIN/dp/0338/03380.txt

Text File | 1991-06-25 | 33KB | 534 lines

$Unique_ID{COW03380}
$Pretitle{296}
$Title{Sri Lanka
Chapter 3B.   Government Policies}
$Subtitle{}
$Author{Peter R. Blood}
$Affiliation{HQ, Department of the Army}
$Subject{percent
1980s
government
land
early
production
tea
coconut
state
output}
$Date{1990}
$Log{}
Country:     Sri Lanka
Book:        Sri Lanka, A Country Study
Author:      Peter R. Blood
Affiliation: HQ, Department of the Army
Date:        1990

Chapter 3B.   Government Policies

     Government support for farmers takes several forms, including the
provision of credit for producers, the setting of minimum prices for
agricultural produce, the building of irrigation works, and the encouragement
of internal migration to newly irrigated areas. Since the late colonial
period, the government has played a growing role in the provision of credit to
smallholders on favorable terms. Until 1986 the main instrument of this policy
was the subvention of cooperative societies. Agricultural credit took three
forms: short-term loans to farmers for the purchase of seeds and fertilizers;
medium-term loans, intended for the purchase of machinery; and long-term loans
for capital expenditure on storage, transport, and rice-milling apparatus. The
long-term loans were not available for individual farmers, but were used by
the cooperative societies to acquire infrastructural facilities.

     The actual performance of credit provision through cooperatives generally
fell short of expectations. Institutional credit did not displace the older
sources of credit, such as the village moneylender, friends, and relatives.
The inability to repay loans, procedural difficulties, and the existence of
unpaid loans already taken from the cooperatives were some reasons given by
farmers for preferring noninstitutional credit sources. Another problem with
the credit furnished by cooperatives was the high rate of default. This rate
may have been attributable partly to real difficulties in repayment, but it
also was the result of a widely held impression that government loans were a
form of social welfare and that it was not necessary to repay them.

 The New Comprehensive Rural Credit Scheme implemented in 1986 sought to
increase the flow of credit to smallholders. The Central Bank guaranteed up to
50 percent of each loan in the event of losses incurred by banks lending under
the program, and eligible farmers received a line of credit for three years.
Loans were automatically rescheduled at concessional rates when crops were
damaged by events beyond the farmer's control. In 1986 cultivation loans under
this program amounted to nearly Rs257 million, about 74 percent for paddy and
the rest for other food crops.

     Another important policy was the Guaranteed Price Scheme, which came into
effect in 1942. Under this program the government agreed to purchase rice and
some other produce at set prices. The intention was to support the farmer's
standard of living. For a period in the early 1970s, when the island was
threatened by food shortages, the government ordered peasants to market all of
their rice through this scheme and at times set the price at a level lower
than that of the free market. This policy had the effect of reducing the
incentive to grow rice. The program lost some of its impetus in the 1980s. In
1986 the government set the price below the free-market rate for most of the
year. As a result of the policy, purchases under the program accounted for
only about 6 percent of the rice crop, mostly from districts where private
traders were unwilling to operate because of the poor security situation.

     Since the 1930s, governments have promoted irrigation works and
colonization projects in the dry zone in an attempt to increase rice
production and reduce land pressure and unemployment in the more densely
settled wet zone. The lack of infrastructure and the prevalence of malaria
hampered these programs in the early years. After the near eradication of
malaria, increased government investment in infrastructure and enhanced
financial support for migrants made the new lands more desirable. Between 1946
and 1971, the proportion of the population living in the dry zone increased
from 12 to 19 percent (see Population, ch. 2).

     At the end of 1968, about 352,000 hectares were under irrigation for rice
cultivation; some 178,000 hectares under major storage reservoirs and
barrages, and approximately 174,000 hectares in minor irrigation projects. In
the 1970s and 1980s, governments pursued major irrigation programs, most
notably the Mahaweli Ganga Program, which was lent added impetus and became
the Accelerated Mahaweli Program in 1978. The increasing size of the Mahaweli
project dwarfed its earlier endeavors. According to the plan, approximately
593,000 hectares of previously arid land would be brought under irrigation by
1992. In 1986 some 76,000 hectares of new land were under cultivation as a
result of this project.

     Other long-standing government policies designed to help farmers included
subsidies for fertilizer, seed paddy, and other inputs. Government efforts
also partly contributed to the adoption of improved cultivation practices and
high-yielding seed varieties in paddy farming in the 1960s.

Land Tenure

     Modern land tenure policy dates from the Land Development Ordinance of
1935, which forbade the transfer of crown lands for purposes of cultivation
except to enlarge the landholdings of near-landless or landless peasants. The
intent of this ordinance was to help small farmers whose livelihood was seen
to be at risk from the exploitation of rich peasants and urban landowners.

     In 1958 the Paddy Lands Bill was enacted, mainly to benefit the tenant
farmers of some 160,000 hectares of paddy land. The bill purported to assist
tenants to purchase the land they worked, to protect them against eviction,
and to establish a rent ceiling at around 25 percent of the crop. It also
established cultivation committees, composed of rice farmers, to assume
general responsibility for rice cultivation in their respective areas,
including the direction and control of minor irrigation projects. Shortcomings
in the law and official indifference in enforcing the act hampered its
effectiveness, and many observers termed it a failure. In some regions tenants
who tried to pay the lower, official rents were successfully evicted by
landlords, and the old rents, often about 50 percent of the produce, remained
in force. In the 1980s, however, the rent ceiling of 25 percent was effective
in most districts.

     The Land Reform Law of 1972 imposed a ceiling of twenty hectares on
privately owned land and sought to distribute lands in excess of the ceiling
for the benefit of landless peasants. Because both land owned by public
companies and paddy lands under ten hectares in extent were exempted from the
ceiling, a considerable area that would otherwise have been available for
distribution did not come under the purview of the legislation. Between 1972
and 1974, the Land Reform Commission took over nearly 228,000 hectares,
one-third of which was forest and most of the rest planted with tea, rubber,
or coconut. Few rice paddies were affected because nearly 95 percent of them
were below the ceiling limit. Very little of the land acquired by the
government was transferred to individuals. Most was turned over to various
government agencies or to cooperative organizations, such as the Up-Country
Co-operative Estates Development Board.

 The Land Reform Law of 1972 applied only to holdings of individuals. It left
untouched the plantations owned by joint-stock companies, many of them
British. In 1975 the Land Reform (Amendment) Law brought these estates under
state control. Over 169,000 hectares comprising 395 estates were taken over
under this legislation. Most of this land was planted with tea and rubber. As
a result, about two-thirds of land cultivated with tea was placed in the state
sector. The respective proportions for rubber and coconut were 32 and 10
percent. The government pai