Sunday, 9 May 2010

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Domestic Potato Industry and its sustenance

Until the early 1990s, potatoes were grown and consumed in Europe, North America and countries of the former Soviet Union. Since then, there has been a dramatic increase in potato production due to the demand in Asia, Africa and Latin America. At present, of the world potato production, which is 330 mm mt in 2008, 52 percent is produced by the developing countries.

China is the biggest potato producer (74 mm mt in 2008), followed by the Russian Federation and India. Europe takes the first place in terms of per capita consumption of potatoes and it is about 3 times higher than the average world per capita consumption of potato, which stood at 31.4 Kgs.

The per capita consumption of potato in Asia is about 24 Kgs with the highest per-capita in China. The corresponding figure in Bangladesh and India is about 24 Kgs, 17 Kgs respectively.

However, since there are many varieties of alternative tubers such as sweet potato, manioc and other non traditional yams and also rice being the staple food, the per capita consumption of potato in Sri Lanka remains low and at present it remains about 7 Kgs per annum.

The cultivation of potato in Sri Lanka dates back to the period of Dutch and since then potato has been cultivated in several districts where the climate and the soil type is conducive for this crop.

At present, there are about 30,000 growers involved in potato cultivation, of which 80 percent occupies less than 0.4 ha (1 acre).

Potato is cultivated mainly in the Badulla and Nuwara-Eliya districts in an extent of 3982 ha (2008/09).

In addition, the cultivations also carried out in other areas such as Kalpitiya in Puttalam, Hanguranketha and Jaffna.

The cultivation in these areas is confined to around 40-50 ha.

But there has been a drop over the past few years due to declining profitability as against the rising cost of production.

For instance, the extent under cultivation was around 5500 ha in 2004/05 has declined to 3982 ha by 2008/09.

This drop has taken place in both Badulla and Nuwara-eliya districts.

The cultivation in other districts also shows a slight decline over the past years.

However, with the eradication of terrorism, in the North, there is a potential to increase potato cultivation in the Jaffna district in the future.

Cost of Production

The average cost of production of potato greatly varies due to the type of seeds and other agronomic practices. Assuming the seed cost is Rs. 8750 per 50 Kg and productivity is around 6000 Kgs per acre, the cost of production is estimated at around Rs. 292,000.

The locally produced good quality seeds are limited and it caters only for 10-15 percent of the seed requirement.

The price of good quality imported seeds is 30-35% higher than the locally produced seeds.

It is also estimated that 2500 Kgs of seeds are required for one acre.

This shows that the seeds itself accounts for about 55-60 percent of the total cost.

Most of the farmers (65-70%) therefore tend to use the locally produced seeds or the seeds obtained from the previous harvest.

The quality of these seeds is quite lower and it leads to reduce the production.

This mainly attributed to the low profitability of potato growers.

Seasonality and the Cultivation Pattern

Potato cultivation in the Badulla district, particularly in Welimada, Bandarawela, Uva-Paranagama and Kappettipola areas is done in Yala and Maha seasons.

The cultivation in Yala takes place in May - July and the yield is ready to be harvested by the end of September - November.

The Maha crop in the same district starts by the end of November and is harvested by March-April in the following year. The potato cultivation in Yala in Nuwara eliya starts by January - February and the harvest is ready by April. The Maha cultivation in Nuwara eliya is limited and is undertaken only in certain locations in the district. The cultivation in these areas is ready to be harvested by early October and continued until early December.

On the whole, the domestic potato production is available during the months of March-April and September to early December.

The highest production is expected in the period from September to October, which is about 35,000-40,000 mt. Of this harvest, 10-14 percent is used as seed potatoes. Therefore, the actual quantity available for consumption remains around 28,000-35000 mt.

Domestic Production and Import

The domestic production of potato has decreased by 24 percent from 2005 to 2007. In the meantime, there has been a significant increase in the import of potato.

The quantity imported in 2009 was more than two fold compared to that of 2005. This has been mainly attributed by the reduction of taxes on the imported potato. After potato was named as an essential food item in 2007, it was subjected to a Special Commodity Levy (SCL) under the Special Commodity Act. A levy of Rs. 20 per kilogram was then imposed on the imported potato. From November 2009, this has been reduced to Rs. 10. However, before 2007, the imported potato was subjected to Custom Duty of Rs. 20 per Kilogram and all other taxes such as PAL, SRL and VAT.

The custom data reveals that the import of potato has taken place in different quantities throughout the year. Out of 95,000 mt of potato imported in 2009, the highest quantity of 13217 mt has been imported in December.

This was mainly to maintain a reasonable price in the market during the festival season.

The import was also high in January, June and July as the domestic production remained low during these months.

The lowest quantity of 1580 mt of potato has been imported in October. This is due to the harvesting of the Yala crop. However, sometimes, the imported quantities are available in the market during the harvesting season which prevents a good price for the local producers.

Key Issues

* The potatoes which are locally produced are available in the market mainly during two seasons; March- April and September-early November (There may be slight variation due to seasonal effect). The importation of potato should be reduced during these seasons.

* The increasing cost of production reduces the margin of the growers. The high cost of seeds is the main cause for this.

* The shrinking of the profit margin of growers is also associated with the price of imported potato in the market. The tax reduction has encouraged the import and discouraged the cultivation.

The importation of potato could be done during the months of January, February, June, July, August and December to minimize the negative impact on the domestic growers.

During the harvesting seasons, the balance requirement can be imported to ease the consumers.

The actual quantity to be imported should be determined based on the per capita consumption.

The extent under cultivation be increased by 7500 ha by 2018 on an average of 940 ha of new lands per year from 2011 onwards.

This could be done mainly in areas like Jaffna, Kalpitiya and in the Kandy district.

The imports have to be reduced by 7500 mt per year from 2011 onward to encourage the growers to invest in the cultivation. The domestic seed production has to be strengthened by providing required infrastructure and the human resources to the Potato Research Station, Seetha-eliya.

The writer is Assistant Director, Department of National Planning.

 

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