Baba’s Explainer – Sri Lanka’s organic farming disaster

  • IASbaba
  • July 20, 2022
  • 0
International Relations
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  • GS-2: India and its neighbourhood
  • GS-2: Effect of policies and politics of developed and developing countries on India’s interests

Context: Sri Lanka’s economy is in free fall. Runaway inflation reached 54.6 percent and country is now headed toward bankruptcy.

  • Nine in 10 Sri Lankan families are skipping meals, and many are standing in line for days in the hope of acquiring fuel.
  • In an uprising nearly 300,000 protesters took over President Gotabaya Rajapaksa’s home and offices and set fire to Prime Minister Ranil Wickremesinghe’s home. Rajapaksa resigned after fleeing the country, leaving Wickremesinghe as interim president.
What has been the reason for Sri Lanka Economic Crisis?

There’s no singular cause for the crisis, which had been building for years due to multiple factors

  1. Historical imbalances in the economic structure
  • Even in the 21st century, Sri Lanka’s economic fortunes continued to be tied to the export of primary commodities such as tea and rubber, and garments.
  • It mobilised foreign exchange reserves through primary commodity exports, tourism and remittances, and used it to import essential consumption items including food.
  1. Slowdown much before the Pandemic
  • Possibly because of pent-up demand, Sri Lanka’s post-war GDP growth was reasonably high at 8-9% per annum between 2009 and 2012.
  • However, the economy was on a downward spiral after 2013 as global commodity prices fell, exports slowed down and imports rose.
  • The average GDP growth rate almost halved after 2013.
  1. Continuing drain of foreign exchange reserves
  • During the period of the war, budget deficits were high. The 2008 global financial crisis of 2008 had led to flight of capital further draining Sri Lanka’s foreign exchange reserves.
  • It was in this context that the government obtained $2.6 billion loan from IMF loan in 2009 with the conditionality that budget deficits would be reduced to 5% of the GDP by 2011.
  • This commitment tied the hands of the government to go for counter-cyclical fiscal policy when economy slowed down after 2013.
  1. Terrorist Attacks
  • In April 2019, the crisis accelerated after suicide bombings at churches hurt the island nation’s critical tourism industry.
  • Consequently, the number of tourists fell sharply leading to a decline in foreign exchange reserves. This weakened its currency and made it more difficult for the government to import essential goods.
  1. Pandemic
  • The COVID-19 pandemic in 2020 made the bad situation worse. Exports of tea, rubber, spices and garments suffered. Tourism arrivals and revenues fell further.
  • The pandemic also necessitated a rise in government expenditures: the fiscal deficit exceeded 10% in 2020 and 2021, and the ratio of public debt to GDP rose from 94% in 2019 to 119% in 2021. This hurt at the basic macro-economic fundamentals of the economy.
  1. Mis-guided Policies
  • The new government which came to power in Nov 2019 went for lower taxes as was promised in their election campaign. VAT rates were reduced from 15% to 8%. The nation building tax, certain other taxes and the economic service charges were abolished.
  • At the end of 2019, tax cuts slashed government revenue which further impaired government abilities to fulfil its basic welfare responsibilities.
  • But in the spring of 2021, President Rajapaksa made an unusual decision: He banned synthetic fertilizer and pesticide imports practically overnight, forcing Sri Lanka’s millions of farmers to go organic. It proved disastrous, as a group of Sri Lankan scientists and agriculture experts had warned.
Why did Sri Lanka go for banning of chemical fertilizers?
  • Sri Lanka annually spent about $260 million (or about 0.3% of its GDP) on fertiliser subsidies. Most of the fertilisers are imported.
  • To prevent the drain of foreign exchange reserves, the government came up with a bizarre solution in 2021 to ban all fertiliser imports from May 2021, and declared that Sri Lanka would overnight become a 100% organic farming
  • According to one estimate, the president’s agrochemical ban was poised to save Sri Lanka the $400 million it was spending yearly on synthetic fertilizer, money it could use toward increasing imports of other goods.
  • The government also argued that chemical fertilizers and pesticides were leading to “adverse health and environmental impacts” and that such industrial farming methods went against the country’s heritage of “sustainable food systems.”
  • Instead of fixing the crisis, however, the move of organic farming only worsened it.
What are the merits of organic farming?
  • Environment-friendly: The farming of organic products is free of chemicals and fertilisers, so it does not harm the environment. This can drive a transformation towards sustainable agriculture in future where climate change threatens food security.
  • Nutritional: As compared to chemical and fertiliser-utilised products which have high pesticide residue and are harmful, organic products are more nutritional, tasty, and good for health.
  • Economical: In organic farming, no expensive fertilisers, pesticides, or HYV seeds are required for the plantation of crops. Therefore, in a country like India where more than 86% of farmers have less than 1 hectare of land, organic farming can be economically sustainable.
  • Reduces dependence on government measures: With the usage of cheaper and local inputs, a farmer can make a good return on investment. This will reduce the dependency of farmers on minimum support prices and other subsidies.
  • High demand: There is a huge demand for organic products due to their popularity and health benefits in India and across the globe, which generates more income through export. It will help farmers to achieve higher remuneration for their inputs.
  • Water Conservation: Organic farming improves soil health and fertility. It requires careful use of water resources hence leading to conservation of water. This is necessary for India where according to a report by NITI aayog 75 Indian cities are threatened with extreme water scarcity.
What are the challenges/concerns with Organic farming?

The emerging threats such as climate change induced global warming; flooding, relative market demand etc. pose a serious challenge for the growth & viability of the organic food sector to transform in economies of scale due to following reasons:

  • Less production: The products obtained through organic farming are less in the initial years as compared to that in chemical products. So, farmers find it difficult to produce on a large scale which limits their earnings as well as market linkages.
  • Shorter shelf life: Organic products have more flaws and a shorter shelf life than that of chemical products. This leads to high storage and transportation cost. In India, there is inequity in cold storage availability between states thus shorter shelf life limits uptake from more farmers.
  • Cost of Production: The cost of cultivation increases as it takes more time and energy to produce than its synthetic input-intensive counterpart. In India where the majority of farmers live on subsistence, organic farming is not viable for them.
  • Lack of Skills: Specialised farmer training costs, higher processing and inventory holding costs, and increased packaging, logistics and distribution costs add to the price of end products.
  • Low awareness: There is low awareness at the producer level on the difference between conventional farming and organic farming, while on the consumer side there is confusion between natural and organic products.
  • High Prices: Growing demand and low supply have further created an inflationary pressure on organic food products; it leads to customers opting for non-organic cheap products. Thus it creates a negative view that organic food is only for the wealthy and restricts widespread consumption.
  • Certification Constraints: Much of the potential is constrained due to factors like non-recognition of self-certification by APEDA, which insists on third-party certification for exports while the agriculture ministry grants subsidies to PGS-certified products.
How did chemical fertilizer ban impact Sri Lankan Agriculture?
  • The organic policy was implemented to sort of ameliorate an ongoing crisis, ironically, what it did was that it ended up exacerbating the crisis.
  • The agrochemical ban caused rice production to drop 20 percent in the six months after it was implemented.
  • This caused a country that had been self-sufficient in rice production to spend $450 million on rice imports — much more than the $400 million that would’ve been saved by banning fertilizer imports.
  • The production of tea, Sri Lanka’s literal cash crop — it’s the country’s biggest export — fell by 18 percent. The government has had to spend hundreds of millions on subsidies and compensation to farmers in an effort to make up for the loss of productivity.
  • While agrochemicals cause a host of environmental and public health problems, which in part inspired the ban, they also help farmers grow more food on less land, which is critical for small, developing countries like Sri Lanka.
    • Sri Lanka as a country rely on agriculture for both sustenance and export income.
  • Around five months into the ban, farmers were allowed to begin using synthetic fertilizers on tea and a few other crops while keeping the ban in place for others, but by that point, much of the damage was done.
What is the dilemma or trade-offs involved in present day agriculture?
  • Sri Lanka started subsidizing fertilizers in the 1960s and we saw that rice yields tripled and it became self-sufficient.
  • That resulted in much of the labor force moving out of agriculture and into higher-paying jobs, a story that played out across the globe over the past 60 years.
  • Synthetic fertilizer makes crops grow faster and bigger than organic fertilizer, such as animal manure, and pesticides control insect infestations and diseases that can destroy crops.
  • The widespread adoption of the two agricultural inputs since the mid-20th century, known as the Green Revolution, helped lift countries like Sri Lanka out of grinding poverty.
  • But the expansion of conventional agriculture hasn’t been without steep costs; agrochemical use is also rife with serious environmental and public health problems.
  • Pesticide exposure is linked to a range of health issues, including respiratory and central nervous system symptoms.
  • Also, around 1 in every 8 suicides worldwide is done by ingesting pesticides, with especially high rates in South Asia.
  • When synthetic fertilizer and pesticides leach into waterways, they can kill off wildlife and poison drinking water sources, and their production and application emit high amounts of greenhouse gases and degrade soil.
  • It is also argued that low-income countries’ reliance on imported chemicals from high-income countries strips them of their own food security and makes them vulnerable to the kind of agrochemical price hikes that Sri Lanka experienced.
  • A majority of Sri Lankan farmers supported an organic transition, but wanted more than one year to do so — and they needed more support than they were given to switch to organic.
  • As horrible as the effects of synthetic fertilizers and pesticides are, they have to be weighed against the consequences brought by banning it.
  • But there are ways to minimize the effects of agrochemicals without abandoning them altogether.
What are the ways of minimizing the harms of industrial agriculture?
  • Governments around the world need to increase yields per acre to feed 10 billion people by 2050, lest farmers be forced to clear more and more land to make up for lower yields, with massive environmental effects.
  • Meeting that inevitable demand — while also minimizing the environmental and public health issues brought about by agrochemicals while continuing to increase crop yields — is tricky but possible.
  • A more sustainable approach requires
    • making crops higher-yield through breeding,
    • making nitrogen fertilizers more efficient,
    • instituting “precision farming” technologies, like drones and sensors, to more accurately analyze where fertilizer is being over- or under-applied.
  • Practices popular among organic agriculture proponents would also help, like employing cover cropping, double cropping, adding organic fertilizer along with chemical fertilizer on fields, and planting trees and shrubs on farms, known as agroforestry.
  • Also, According to the economic theory of the Environmental Kuznets Curve, once countries reach a certain level of per capita income, economic growth and environmental pollution can decouple as the country can afford to implement stronger environmental regulations and practices without sacrificing economic growth, like crop yields.
What are the key lessons from Sri Lankan crisis?
  • In 2000, 17 percent of Sri Lankans were undernourished and by 2019, that figure fell dramatically to 7 percent, lifting around 2 million people out of hunger. The economic crisis that has now reached a boiling point, caused in part by the organic farming disaster, will horrifically, and ironically, undo some of that progress.
  • Moving away from an agrochemical-heavy food system makes sense in a lot of ways, but the Sri Lanka example underscores the importance of being mindful of the economic, political, and social context of any reform.

As Sri Lanka gets richer, it’ll be more able to prioritize the environment and public health without millions going hungry, but the current crisis — made worse by the sudden, hastily executed organic transition — has made that day farther away

Mains Practice Question –In the context of Sri Lanka Crisis, what are the trade-offs involved in present day agricultural policy?

Note: Write answers to this question in the comment section.


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