Funding for fertilizer for paddy cultivation (Based on Mahaweli C Zone)

Abstract

By the year 2005, 37% of the total paddy production in Sri Lanka came from the lands belonging to the Mahaweli Scheme, and the contribution of the Mahaweli "C" Zone alone to the National Paddy Production was about 6%. Out of 29296 families living in the Mahaweli C zone, 24559 families were engaged in paddy cultivation. Post-independence governments have been involved in the development of paddy cultivation through legislation, institutional structures, irrigation schemes and various subsidies. But instead of reviving economically, paddy farmers have fallen into poverty and indebtedness as paddy cultivation has become unprofitable. The continuing rise in the cost of production relative to the income received from the production has had a detrimental effect on profitability. A major factor influencing the increase in production costs is the increasing use of chemical fertilizers instead of organic fertilizers to increase productivity and the rising prices of chemical fertilizers in the international market. The cost of paddy production carried out without fertilizer subsidy is about 31% of the cost of fertilizer in the structure. There are several methods that paddy farmers can follow to finance the purchase of fertilizer in the Mahaweli C Zone. Use of their savings, borrowing from voluntary societies, borrowing from family relatives, borrowing at high interest from professional lenders, borrowing from the formal financial sector and mortgaging their gold. etc. and the source of which of these various methods is popular has been studied here. According to a survey conducted in the Batalayaya area in the Mahaweli C Zone, 55% of farmers finance the purchase of fertilizer for paddy cultivation using gold pawn loans. Another 26% borrow from voluntary societies, while only 2% minority resort to formal finance.