CEYLON'S RICE SELF-SUFFICIENCY PROGRAM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001600030104-3
• Release Decision: RIFPUB
• Original Classification: C
• Document Page Count: 15
• Document Creation Date: December 22, 2016
• Document Release Date: October 27, 2011
• Sequence Number: 104
• Publication Date: August 1, 1970
• Content Type: IM

 i
Declassified and Approved For Release 2011/10/31 : CIA-RDP85T00875R001600030104-3
%-/ I I / vv+w4 1.4-or r/ / v r" I
nfidenM
INTELLIGENCE
DIRECTORATE OF
IntelligenceI Memorandum
Ceylon's -Rice Self-Sufficiency Program
-EonfideaHaE--
ER IM 70-104
August 1970
Copy No. 53
Declassified and Approved For Release 2011/10/31 : CIA-RDP85T00875R001600030104-3
 Declassified and Approved For Release 2011/10/31 : CIA-RDP85T00875R001600030104-3
WARNING
This document eontetns information affecting the national
defense of the United States, within the meaning of Title
18, sections 793 and 794, of the US Code, as amended.
Its transmission or revelation of its contents to or re-
ceipt by an unauthorized person is prohibited by law.
GROUP I
Excluded from oalomodc
downgrodIng and
dedauifimlan.
Declassified and Approved For Release 2011/10/31 : CIA-RDP85T00875R001600030104-3 _
 Declassified and Approved For Release 2011/10/31 : CIA-RDP85T00875R001600030104-3
CONFIDENTIAL
CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
August 1970
INTELLIGENCE MEMORANDUM
Ceylon's Race Self-Sufficiency Program
Introduction
Soon after her election in the spriag of 1970,
Prime Minister Bandaranaike of Ceylon disclosed her
intention to continue the policy of giiring priority
to the expansion of food production. An a result
of measures taken by previous governments, rice
production had grown rapidly and Ceylon's dependence
on rice imports had fallen sharply -- from about
three-fifths of the total rice available in the
early 1950s to about one-fifth in 1969.
This memorandum evaluates Ceylon's progress
toward self-sufficiency in rice and the policies
that have been responsible for that progress. It.
also assesses the outlook for Ceylon's rice pro-
duction through the mid-1970s in the perspective
of the new government's declared policy intentions.
Progress Toward Self-Sufficiency
1. Since independence in 1948, successive
governments in Ceylon have encouraged rice pro-
.duction as an integral part of their development
efforts. Rice is by far Ceylon's most important.
Note: This h?emoran.dum was produced solely by CIA.
It was prepared by the Office of Economic Research
and was coordinated with the Office of Current
Intelligence and the Office of National Estimates.
CONFIDENTIAL
Declassified and Approved For Release 2011/10/31 : CIA-RDP85T00875R001600030104-3
 Declassified and Approved For Release 2011/10/31 : CIA-RDP85T00875R001600030104-3
CONFIDENTIAL
food crop and is the staple food of the Ceylonese
diet. At independence, however, almost three-fourths
of the rice consumed was imported. Domestic pro-
duction was inhibitei by a primitive technology and
the fact that it was more profitable for farmers to
work on rubber or tea plantations than to grow rice,
for the market. Since independence, a rapidly grow-
ing population and lack of dynai ,ism in the world
rubber and tea markets have prov9.ded a strong eco-
nomic incentive for developing rice production.
2. The continuing government support of the
island's-rice economy has been accompanied by a- rapid
growth in rice production. Production increased at
an average annual rate of 6% during 1952-69, while
population growth averaged about 2h%. Thus the per
capita availability from domestic sources, increased
sharply, and dependence on rice imports declined to
about 20% in 1969.
3'. This relatively rapid growth in rice pro-
duction -- about twice the rate experienced by all
rice-growing countries combined -- reflects both
an increase in the area under cultivation and an
increase in yields. Total rice acreage increased
from about 0.8 million acres in 1951 to 1.4 mil-
lion acres in 1969. At the same time, yields per
acre increased from about 1,200 pounds to 2,200
pounds (see Tgble,1). The growth of both production
and yields was especially rapid during 1967-69, and
preliminary estimates for the 1970 crop indicate
that this rapid growth will be sustained. ~
Government Policies
4. Ceylonese government actions that have
influenced the growth of rice production include
(a) expansion of irrigated areas, (b) land re-
settlement programs, (c) an agricultural extension
service, and (d) a government price-support pro-
gram. In addition, the government played a major
role in developing arl disseminating improved seed
varieties that were '.argely responsible for the
c'cent sharp rise in yields per acre.
5. As a result of the government's programs,
the total paddy area has increased by about 3% a
year since 1951. The irrigated area grew faster,
however,, 'and the proportion of the crop under ir-
rigation increased from 45% in the early 1950s
CONFIDENTIAL
Declassified and Approved For Release 2011/10/31 : CIA-RDP85T00875R001600030104-3
 Declassified and Approved For Release 2011/10/31 : CIA-RDP85T00875R001600030104-3
CONFIDENTIAL
0
to 60% in 1967 (see Table 2). The government ex-
panded the irrigated area by concentrating for the
most part on improving and adding small irrigation
works in the wet zone -- the southwest quarter of
the island which has two monsoons and accounts for
three-fourths of total rice production (see the map).
Reservoirs in this area are smaller and less ex-
pensive than in the dry zone because of the second
monsoon. The government also expanded the paddy
area in the dry zone -- where there is only one
monsoon and reservoirs must be larger -- by con-
structing larger irrigation works.
6. Ths expansion in irrigation was accompanied
by a land resettlement program that increased the
average size of paddy holdings and thereby enhanced
farmers' ability to invest in the land. The govern-
ment. adminis".-ers resettlement programs to redistribute
land in the heavily populated wet zone and to colonize
newly irrigated land in the dry zone. The new
settlers receive considerable government assistance'
for the construction of houses, wells, and roads as
well as for planting materials and agricultural loans.
Between 1946 and 1962 the average size of paddy
holdings increased and the area in holdings of less
than 1 acre declined dramatically. In 1962, almost
60% of the rice area consisted of holdings of more
than 5 acres, compared with 30% in 1946 (see Table
3). This proportion most likely has increased even
further since 1962 as resettlement has continued.
7. The government also spread modern agricul-
tural techniques through an extensive agricultural
extension service. Cultivation practices at the
time of independence were extremely primitive;
practically the only countries with lower average
yields than Ceylon were India, Pakistan, and the
Philippines. In 1954 the service wad' reorganized
and an ambitious program was launched to bring
about a full-scale conversion to Japanese culti-
vation practices. Emphasis was placed on selecting
good seeds, transplanting in wide-spaced rows,
better preparation of the land, and other rather
simple procedures, all of which could lead to a
doubling of yields. However, the Japanese system
requires more labor than was available in many
areas, and its use has remained limited.
3 -
CONFIDENTIAL
Declassified and Approved For Release 2011/10/31 : CIA-RDP85T00875R001600030104-3
 Declassified and Approved For Release 2011/10/31 : CIA-RDP85T00875R001600030104-3
CONFIDENTIAL
8. improved seed varieties also made a signiyfi-
cant contribution, particularly after 1964. Ceylon's
research on paddy has yielded a large number of high-
yielding hybrid seeds. In 1964, less than 10% of the
race area was sown with improved seeds, but by 1968
this had increased to 75%. The most commonly used
improved seeds in the wet zone are H-4 and its
progeny -- a cross between Ceylonese and Indonesian
varieties -- which was first released to farmers
in 1958. Ceylonese i:esearchers believe that under
normal conditions yields of about 3,500 pounds per
acre -- about 60% higher than average yields now
obtaining -- can be expected from H-4 when certain
recommended amounts of fertilizer are applied.
Yields can be economically.incr?eased further to
about 4,000,.to 4,500 pounds per acre by applying
even more fertilizer. IRRI strains, originally
developed in the Philippines, also have been tested
for use in the dry zone and are showing very favorable
results. Thus the potential for the new seeds is
high, but there is still a considerable gap between
optimal practices and those actually used.
9. Use of fertilizer has increased under a
government subsidy program, but the average appli-
cation rate in 1968 was still far below the recom-
mended levels for achieving the potential of the
high-yielding seeds. The recommended amount of
fertilizer for an acre seeded with H-4 is 45 pounds
of nitrogen (N), 35 pounds of phosphoric acid (P205),
and 28 pounds of potash (K20). Actual fertilizer
application rates and average yields during 1965-68
were as follows:
CONFIDENTIAL
Declassified and Approved For Release 2011/10/31 : CIA-RDP85T00875R001600030104-3
 Declassified and Approved For Release 2011/10/31 : CIA-RDP85T00875R001600030104-3
CONFIDENTIAL
Pounds. per Acre
Year
N
P205
K20
Average Yields
1965
11.5
5.7
4.7
1,582
1966
12.4
5.3
6.2
1,638
1967
18.9
7.5
10.0
1,904
1968
24.1
4.3
6.2
2,042
10. The various governmental programs were re-
inforced by its Guaranteed Purchasing Scheme (GPS).
The scheme became effective in 1952 when a guaranteed
purchasing price of 0.26 rupee per pound was in-
troduced, which until the mid-1960s amounted to
almost double the cost of rice imports. Moreover,
,st was more than double the price charged consumers
eider the rice ration program.* The farmer quickly
a.ealized the advantage of selling most of his crop
at high support prices and purchasing what he could
at lower ration prices, holding back only enough to
meet his own consumption requirements that could not
be filled under ration. By the early 1960s, almost
60%. of the rice crop was purchased by the govern-,
ment under GPS. Although the program was poorly
administ-gyred, suffered from numerous frauds and
abuses, and entailed high costs to the government
for purchasing and distributing rice and for sub-
sidies, it was highly successful in shifting the
traditional peasant cultivator from producing
primarily for his own consumption to a market
orientation.
11. In 1966 the government's policies were
modified to raise rice prices and increase producer
subsidies. Subsidies reduced the cost of fertilizer
and seeds to the farmers by nearly 50%. Moreover,
fertilizer imports were liberalized. Market prices
Until 1966, the ration system, which has existed
since World War II, provided each Ceylonese four
pounds of rice a week -- about four-fifths of con-
sumption -- at the highly subsidized price of 0.12
rupee per pound.
CONFIDENTIAL
Declassified and Approved For Release 2011/10/31 : CIA-RDP85T00875R001600030104-3
 Declassified and Approved For Release 2011/10/31 : CIA-RDP85T00875R001600030104-3
CONFIDENTIAL
for rice ,increased when the government cut the rice
ration program in half. The ration cut sent con-
sumers, to the open market where free market prices
increased to a level higher than the government pro-
curement price. Government procurements dropped by
more than 50%. The government then raised its pro-
curements price by 20% -- the first increase since
1952 -- to obtain the grain necessary to maintain
even the abbreviated ration program.
12. The government price support program con-
stitutes a substantial subsidy for rice farmers,
but the extent of the subsidy has declined sharply
in recent years. The support price for rice, which
was twice the world price during the 1950s, was
still 50% higher in 1966 but less than 20% higher
in 1969 -- $169'per ton compared with an import
price of $143 per ton.* The excess cost to the
government -- as. measured by the differential be-
tween-the procurement price and the import price
applied to tonnage procured under the government
program -- amounted to about 70 million rupees, only
about 3% of total current budgetary expenditures.
The government was willing to pay this extra cost
because of the foreign exchange savings realized on
the reduction in rice imports. If imports had re-
mained at the 1966 level, the cost would have been
about-$70 million in 1969, compared with actual
costs of $44 million.
13. The availability of foreig4i exchange has
been crucial to Ceylon's economic progress, and
it is unlikely that a similar savings of foreign
exchange could have been realized in alternative
subsidies of either import substitution or export
promotion activities. Food is the island's princi-
pal import, representing about one-half of total
imports, and rice is a significant portion of im-
ported food. The successful promotion of traditional
exports is precluded by the relatively poor world
market for Ceylon's principal exports -- tea and
rubber. The development of industry would not
necessarily decrease the demand for imports, be-
cause of the dependence on foreign sources for raw
materials and capital equipment. Thus the govern-
ment's subsidy of rice production probably was
* For comparability with the price of imported
milled rice, the support price for paddy is adjusted
upward to reflect milling losses.
CONFIDENTIAL
Declassified and Approved For Release 2011/10/31 : CIA-RDP85T00875R001600030104-3
 Declassified and Approved For Release 2011/10/31 : CIA-RDP85T00875R001600030104-3
CONFIDENTIAL
economically sound.
14. Whereas the producer subsidy has been de-
clining, the cost to the government of its rice ration
program for consumers has been increasing. Total
budgetary expenditures for rice subsidies increased
from 450 million rupees in 1966 to more than 560 mil-
lion rupees in 1969, amounting to about one-fourth
of current budgetary expenditures. At the same
time, the consumer's share of this subsidy increased
sharply -- from 67% to 88% -- as the producer subsidy
declined. Since 1966, consumers have received two
pounds of rice per week free; previously they had
received four pounds at a highly subsidized price.
The higher government expenditures reflected both a
rising population and a rising import price for rice.
The consumer subsidy, unlike the producer subsidy,
is not justifiable on economic grounds but instead
is in line with the government's social welfare goals
of a more editable distribution of income.
Outlook
15. Ceylon could well become self-sufficient in
rice at current consumption levels by the mid-1970s.
For production to approximately equal consumption in
the mid-1970s, an average annual increase of 8% to
9% in production is necessary. Ceylon plans to
achieve about that rate during 1970-76 by expanding
the area in paddy by 2.4% and increasing average
yields 6.2% annually. The area expansion is in line
with achievements over the past 20 years and should
present no problems. A 6.2% annual increase in
yields will be more difficult to achieve, however --
it would mean that by 1976 average yields would be
over 3,300 pounds per acre. Yields of this magnitude
are equivalent to those now achieved in Taiwan and
about two-thirds those now achieved in Japan.
16. Irrigation, which is the restuicting factor
in rice production in many South Asian countries,
is not a major problem in Ceylon, but irrigation
practices can be improved. Ceylon has not made full
use of its expanded irrigation because of wasteful
grater practices. Much more water than necessary is,
used on the maha crop (the larger winter crop) and
often insufficient water remains in the reservoirs
to irrigate the yaZa crop the smaller summer crop).
Although the irrigated area had increased 160%
between 1951 and 1967, only 60% of,the irrigated
7 -
CONFIDENTIAL
Declassified and Approved For Release 2011/10/31 : CIA-RDP85T00875R001600030104-3
 Declassified and Approved For Release 2011/10/31 : CIA-RDP85T00875R001600030104-3
CONFIDENTIAL
area was double cropped in 1967, largely because of
waateful irrigation practices. In addition to im-
proved water use, prospects are excellent for the
irrigated area to be greatly increased by a new
irrigation project. Construction is beginning on
the massive Mahaveli Ganga irrigation project
sponsored) by the World Bank, which, when completed,
will irrigate 900,000 acres in the dry zone. The
project is to be built in three stages over 30 years,.-
with the first stage (costing about $50 million, of.
which about three-fifths is financed by foreign aid)
scheduled to provide irrigation to 328,000 acres by
the mid-1970s. When completed, the project will
increase-the island's irrigated area by about 50%,
and most of the expansion will bring uncultivated
land under the plow.
17. Rice self-sufficiency most likely can be
achieved so long as the present government continues
its predecessor's policies of support to the rice
farmers. Success will depend on.whether enough
farmers can be enabled and persuaded to use sufficient
modern inputs and practices to raise average yields
to the necessary level. The government program has
all the necessary elements -- price supports, modern'
inputs available at low cost to the. farmer, security
of tenur_, credit facilities, and encouragement
and instruction through extension services.
18. Prime Minister Bandaranaike has as yet made
no changes in the government's policies toward rice
farmers. Soon after her election in the spring of
1970, she indicated that she intends to continue her
predecessor's policies in this area. She also
indicated that she welcomed a continuation of foreign
aid, which has supplied much of the fertilizer,
pesticides, and herbicides needed by the rice farmers.
During the election campaign, Mrs. Bandaranaike's
coalition charged that the Mahaveli Ganga irrigation
project constituted a "sellout" to the World Bank,
and her party platform pledged to "reconsider"
certain provisions of the agreement. Because of the
importance of this project to rice production in the
dry.zone, however, the new government is unlikely
to terminate the contract, although some changes in
the terms of the agreement may be requested.
CONFIDENTIAL
Declassified and Approved For Release 2011/10/31 : CIA-RDP85T00875R001600030104-3
 Declassified and Approved For Release 2011/10/31 : CIA-RDP85T00875R001600030104-3
CONFIDENTIAL
19. Ceylon's success in raising rice production
is not liko ly to have much of an effect on its rice-
rubber barter agreement with Communist China. Under
the agreement, in force since 1952, Ceylon exports
rubber to China at premium prices, in exchange for
rice at below world market pricer. Rice from China
could-be substituted for wheat which is now imported
under, concessionary terms from Western countries.
Moreover, it is possible that Chinese textiles or
some other manufactures that Ceylon now buys with
hard currency could be substituted for rice.
Conclusions
20. Through its rice subsidy program, Ceylon has
successfully increased rice production to a point
where self-sufficiency may now be realized by the
mid-1970s. This program -- high support prices paid
to farmers and a subsidized rice ration program for
consumers -- is consistent with the government's
import substitution and social welfare goals. More-
over, savings of foreign exchange realized on the
declining import requirements for rice have had a
favorable impact on Ceylon's balance-of-payments
position. Mrs. Bandaranaike may increase, the con-
sumer subsidy, perhaps to the level prevailing dur-
ing her previous administration (1960-65). She is
unlikely, however, to reduce the existing incentives
to rice farmers.
CONFIDENTIAL
Declassified and Approved For Release 2011/10/31 : CIA-RDP85T00875R001600030104-3
 Declassified and Approved For Release 2011/10/31 : CIA-RDP85T00875R001600030104-3
CONFIDENTIAL
1951
1952
1953
1954
1955
733
1.9S6
565
1957
643
1958
752
1959
747
.1960
883
1961,
885
196.2.,
986
1963
1,010
1964
1,037
1965
745
1966
938
1967 1,132.
1968 1,306
1969 1,3';5
1,283.8 1,638
1,330.8 1,904
1,432.4 2,042
1,374.9 2,208
- 10
CONFIDENTIAL
Declassified and Approved For Release 2011/10/31 : CIA-RDP85T00875R001600030104-3
Production
(Thousand Lon Torts)
452
593
450,
639'
Acreage
(Thousand Acres)
Yield
(Pounds per Acre)
846.1
1,x,96
939.0
1,417
811.0
1,242
1,025.0
1,394
1,099.0
1,495
917.0
1,380
966.0
1,490
1,063.0
1,582
1,034.0
1,619
1,184.0
1,670
1,195.8
1,656
1,268.5
1,739
1.296.E
1,743-
1,304.5- 1,780
1,056.2 1,582
 Declassified and Approved For Release 2011/10/31 : CIA-RDP85T00875R001600030104-3
CONFIDENTIAL
Ceylon:
Rice Area Irrigated
Thousand Acres
1951
1967
Percentage
Increase
Total rice area a/
993
1,568
58
Irrigated:
Maha
223
583
161
YaZa
223
343
54
Rainfed:
Maha
359
424
18
YaZa
188
218
16
a. Harvested area, with oub le-cropped area
counted twice.
Ceylon: Size of Paddy Holdings
Thousand Acres
Percent of
Total
1946
1962
1946
1962
Less than 1 acre
205
25
23
2
1 to 5 acres
426
447
47
40
5 to 10 acres
122
378
14
33
Over 10 acres
147
284
16
25
Total
900
1,134
100
100
CONFIDENTIAL
Declassified and Approved For Release 2011/10/31 : CIA-RDP85T00875R001600030104-3
 Declassified and Approved For Release 2011/10/31 : CIA-RDP85T00875R001600030104-3
CEYLON
LAND USE
78754 7.70
Rico
Rubber
Tee
Coconut
Mixed coconut
and rice
forest and woodland
-- Limit of Irrigation
development
Declassified and Approved For Release 2011/10/31 : CIA-RDP85T00875R001600030104-3