Does Guaranteed Price Regulate the Market Price of Paddy in Sri Lanka? Exploring the Present and Directing the Future

Abstract

An argument arises that the opportunistic behavior of leading millers controlling the paddy market harms the farmers, small and medium-scale millers, and consumers. Therefore, this study aims to examine the policy-level intervention required to regulate and monitor the supply and prices of paddy to secure producers and to assess the impact of guaranteed prices in regulating the market price of paddy. The study used production, imports, guaranteed prices, and market prices of major three paddy types in five selected districts for 7 years. The one-sample t-test was used for analysis. The results of the study provide new insights for policymakers to revisit strengthening of regulatory mechanisms in the industry to function competitively. Further, the study identified the lapses in the implementation of existing regulatory mechanisms that might be harmful to producers, SMS millers, and consumers. In addition, identified the possibility of policy-level interventions to enhance appropriate regulatory measures under the existing legal provisions to minimize the anti-competitive and opportunistic actions of key players in the industry if any, enabling market forces to operate smoothly while minimizing the impact on the performance of SMS millers.