A leading Agri Business Sector enterprise in Sri Lanka – Agstar PLC’s recently released Annual Report the company’s Chairman/CEO – N. G. R. Karunaratne highlights that the year under review from 31st March 2016 to 31st March 2017 was difficult for the Agri
Business sector, primary in view of adverse weather.
According to him, Sri Lanka experienced the worst drought in four decades. The failure of both monsoons resulted in a significant reduction in crop production and market demand for agri inputs.
Thus he notes that the fertilizer industry too recorded a 40% drop in usage.
He also adds that AgStar’s diversification to rice business has not been auspicious, having to face a number of major issues and challenges over the last two years. Crop shortage/failure, adverse weather, escalation of paddy prices, State intervention including fixing of price ceilings and ad hoc policy changes have adversely affected the viability of the rice business.
Meanwhile Agstar PLC’s Managing Director – A. P. Weerasekera points out that in the previous year, there was a mood of optimism with the government announcement of the withdrawal of the fertilizer quota system and removal of the restrictions placed to the
private sector to market fertilizer to paddy sector, thus resulting in the available market expansion approximately by 70%.
But however, he adds that the expectation of increasing the sales volume failed to materialize in the year under review as a result of the prevalence of severe drought and removal subsidy, causing 40% drop in fertilizer usage. The combination
“The combination of these two factors brought down fertilizer usage drastically and as such we were unable to benefit from the opening-up of the fertilizer market” A. P. Weerasekera notes in his review.
He further goes into explaining that compounding the challenge further the government introduced the control price of Rs 2,500 per 50 Kg bag of main straight fertilizer – Urea, TSP, and MOP replacing the earlier import subsidy scheme.
Unfortunately the regulator i.e. the State has held on to the given fixed sales price despite fluctuations in the world market prices, currency exchange, and tax changes, according to him. The lack of a flexible pricing
he further notes that the lack of a flexible pricing resulted in having to frequently sell below the landed cost price and incurring losses on sale. He further adds that they are hopeful the regulator will introduce a fair pricing mechanism for the benefit of the
state and the fertilizer industry.