Domestic agriculture and future challenges

Domestic agriculture and future challenges

A shorter version of a paper presented by
Prof. A D V De S Indraratna at an International Seminar in China in 2011

Prof. A D V De S Indraratna

After Sri Lanka obtained political independence from the British in
1948, and prices of cash crops had begun to fall relatively to those of
consumer imports (Prebisch,1950), the governments of Sri Lanka began to
pay greater attention to domestic agriculture of rice and subsidiary
food crops, for subsistence, while the plantation agriculture was
sustained mainly for export.

The agriculture economy of Sri Lanka thus had fallen into two
subsectors: the import competing food economy dominated by rice but
including other subsidiary food crops as well and the export sector
comprising tea, rubber and coconut (including as well minor export
crops, mainly spices). Very often, the latter is referred to as
plantation agriculture while the former is classified as the
non-plantation or domestic agriculture. Coconut can no longer be treated
as an export crop because more than 90 percent of it is now used for
domestic consumption Forestry, fishing and livestock not included under
either plantation or non-plantation agriculture also belongs to the
sector of agriculture.

The agriculture which was the main stay of the Sri Lankan economy in
the 50’s, in the immediate aftermath of Independence, has gone through
several stages of transition before becoming what it is today. It is
noteworthy that the contribution of agriculture to GDP, total employment
and total exports which were respectively near 50 percent, 53 percent
and more than 90 percent had come down to 12 percent, 33 percent and
less than 20 percent respectively. What is even more noteworthy here is
that despite the share of agriculture’s contribution to GDP falling
below 15 percent, the percentage of country’s total employment engaged
in agriculture is 33 percent, more than twice as much.

Furthermore, three fourths of the country’s 20 million people still
live in rural areas including tea and rubber estates, the majority of
whom are dependent on agriculture or its ancillary work for their
livelihood. The bulk of these rural people also belongs to the estimated
40 percent poor who are below the poverty line of US $ 2.00 (ppp) per

The major significance of agriculture herein lies in the fact that
without removing the surplus labour in that sector and improving its
productivity, it will not be easy to alleviate poverty. It is by
increasing the real incomes of this mass of poor people that it is
possible to raise the demand for goods and services from other sectors
as well, and enhance the overall economic growth of the country. In this
context, Sri Lanka has a lot to learn from the past experience in high
performing economies of East Asia, such as South Korea, Taiwan and Japan
(and the more recent experience of the People’s Republic of China (PRC).

Surplus labour

The domestic agriculture, which is the focus of discussion in this
paper, is characterized by low productivity. Low productivity is
structurally, largely due to surplus labour, insecurity of land tenure
and landlessness and uneconomic land holdings.

The evidence for the existence of surplus labour is not far to seek.
The contribution to GDP by agriculture engaging as much as 1/3 of the
total employment of the country is only 12.5 percent or 1/8. The surplus
labour on agricultural land has, in fact, increased over the years.
Agriculture which had contributed nearly 50 percent of the GDP engaged a
little more than 50 percent of the total employment, whereas now, 12.5
percent of the country’s GDP contributed by agriculture engages as much
as 33 percent of total employment.

Insecurity of tenure

The insecurity of land tenure, the second cause of low productivity,
arises due to two main reasons. One is the lack of ownership of land.
Most of the farmers used to cultivate the land not owned by them on the
basis of what is known as Ande System (a primitive tenancy system).
Under this system, until December 1957, the tenant farmer got one fourth
of the share of the harvest while the land owner got three fourths of

This offered hardly any incentive to the farmer to put in his best
effort to maximize productivity of the land which he used to cultivate.
In December 1957, the Minister of Agriculture in the then MEP Government
headed by the late Mr. S W R D Bandaranaike foresaw the absolute need to
change this system in order to increase the lot of the poor farmer as
well as the productivity of agriculture as a whole. He introduced and
passed in Parliament the legislation called the Paddy Lands Bill, by
which the existing shares between the tenant and the landlord were
reversed by prescribing three fourths of the share of the harvest to the
tenant farmer.


By this same legislation another system of land tenure, called
Thattumaru (alternating cultivation) which was also militating against
increase in productivity was also abolished. After the fall of the MEP
Government, these tenurial reforms were observed more in the breach.

The other reason for insecurity of land tenure has been the lack of
title deeds to prove the ownership of the land possessed by many
farmers. This has not enabled them to obtain the much needed
agricultural credit from banks and other credit institutions by
hypothecating the land, their only asset or possession. In the early A
project by the name of Land Titling implemented in the first years of
this century it was not pursued by the successive ministers of lands.
Landlessness has been an acute problem in Sri Lanka’s agriculture. Of
the 66,600 square kilometers of the total land surface, only about 15
percent constitutes the arable area. Of this also the bulk belongs to
the state. The land shortage has been more acute in the Wet Zone, (the
south western quadrant of the Island) than in the north eastern Dry Zone
where cultivation is more by irrigation than rain-fed. In the late
1940s, the government attempted to ease the land pressure in the Wet
Zone and create a land owning farmer community in the Dry Zone by
allotting government land to them in the latter. Such land settlement
schemes as Gal Oya launched by the then Minister of Agriculture and
Lands of the Board of Ministers, the late D S Senanayake who became the
first Prime Minister of independent Sri Lanka, were erroneously referred
to as Land Colonization Schemes by those who opposed them

The Land Development Ordinance, under which this scheme was operated,
allotted five acres of low land and two acres of highland (later reduced
to three acres and one acre respectively)to each of the allottees
selected from the land-scarce Wet Zone and settled in the North East Dry
Zone. As there was no anti fragmentation law operating, these holdings
were subjected to fragmentation several times over the years, due to
passing down from one generation to another on inheritance or illegal
sale to outsiders in parceled-out lots, and have become uneconomic

The original primary objective of this scheme was to ease the land
pressure in the South West of the country and alleviate the ‘hunger for
land’ of the landless. Though this objective would have been somewhat
achieved, it has not helped to create viable economic holdings of
cultivable land. As explained earlier, the next land reform, ten years
later with the introduction of the Paddy Lands Bill, end of 1957, did
not help to prevent fragmentation of land but only to somewhat improve
security of tenure of the tenant farmer. Even the Kobbekaduwa Land
Reform which came into force 15 years later in 1972, instead of helping
consolidation of land for scale economies, led to further fragmentation
of existing large holdings (or estates).

Uneconomic holdings

The problem of landlessness in domestic agriculture, as has been
described above, has been exacerbated by the characteristic uneconomic
holdings of rice and coconut lands due to fragmentation that has been
allowed to go on, until recently. 97.3 percent of the total number of
holdings with a total extent of 1,218,036 acres or 493, 382 hectares is
less than 5 acres/2 hectares in size. If 5 acres or 2 hectares is
considered an economic holding or viable size, all except 2.7 percent
are uneconomic holdings. The situation in regard to coconut is better.
30 per cent of coconut lands were more than 2 hectares or 5 acres in
size and less than half (43.5 percent ) of the coconut lands were less
than 1 hectare or 2 1/2 acres in size. This was the picture in 2002 as
estimated in the 2002 Agricultural Census. No census has been done since
then. Since fragmentation has been continuing uninterruptedly for
housing and other non agricultural purposes, the situation must have got
much worse than ten years earlier.

To be continued

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