AGRICULTURE, FISHING AND FORESTRY
The growth in the Agriculture sector including forestry and fisheries is expected to decelerate from 4.5 per cent in 1999 to 1.9 per cent in 2000, reflecting largely the projected decline in paddy output in the Yala season and the deceleration in coconut output. Tea and rubber production is expected to perform well in response to continued improvement in prices in the international markets. The fisheries sub-sector is expected to grow by a slower rate of 5 per cent in view of substantial deceleration in growth during the first half of 2000. Meanwhile, with the significant recovery of gem mining observed during the first half of 2000, the Mining and quarrying sector is projected to maintain its growth rate at 4.0 per cent.

The Agriculture sector grew by 2.9 per cent, reflecting largely the improved output levels of plantation crops. Due to increased application of fertiliser and favourable weather conditions, tea and coconut output increased by 13 per cent and 10 per cent, respectively, while rubber production increased marginally with the recovery of prices from the depressed levels that have prevailed over a considerable period of time. An improved yield led to a 1.6 per cent increase in paddy production in the 1999/2000 Maha season despite a drop in the extent sown and harvested. Production of other field crops reported a mixed performance.

Production of chillies, potato, red onion, maize, ground nut, soya bean, sesame and kurakkan increased, while the production of black gram, cowpea and green gram declined. Production of vegetables and fruits also registered increases while sugar production declined due to a drop in output at the Pelwatta factory. The growth in fish production is estimated to have declined from 13 per cent to 2 per cent during the first half of 2000.

Tea
The tea sector continued to show its dynamism with a 13 per cent increase in output during the first half of 2000. Together with the improved management of the plantations by the private sector, the re-emergence of Russia as a major tea consumer and a growing demand for tea by the other major tea importers helped the tea sector. The average price of tea at the Colombo Auctions increased by 21 per cent during the first half of the year, to Rs.129 per kg. Although tea prices declined in May and June due to a seasonal drop in quality and increased production in India, the tea sector remains profitable.

Production improvements in all three elevation categories contributed to the satisfactory performance. Production of low grown teas recorded a significant growth of 18 per cent, while high and medium grown teas increased by 8 per cent each during the first half of 2000. Favorable weather conditions, which prevailed during the period, coupled with increased application of fertiliser, had a positive impact on the output. Meanwhile, the total quantity sold at the Colombo Auctions increased by 3.4 per cent to 146.5 million kg during the period under review.

Tea smallholders, who accounted for 44 per cent of the extent under tea, contributed to 58 per cent of total tea production during the first half of 2000. The average yield of the smallholder sector improved by 12 per cent to 2,235 kg per hectare compared to the yield of 1,662 kg per hectare in the estate sector. The low yield in the estate sector could be attributed to the large extent under low yielding seedling tea in the estates. In contrast, almost the entire extent of smallholding was under high yielding vegetative propagated tea.

Under the fertiliser loan scheme over 7,200 metric tons of fertilizer was distributed to smallholders. The quantity of tea exported during the first half of the year amounted to 135 million kg, an   of 2 per cent compared to the corresponding period of the preceding year. Out of the total quantity of tea exported, 66 per cent was in bulk form, while 26 per cent was in low value added packets. It is important to encourage the production and export of tea bags, which have a high value addition. During the first half of 2000, exports of such value added tea bags accounted for 5 per cent (6.5 million kg) of total tea exports. Tea imported for blending purposes was 0.8 million kg. (More about Tea in SL point of view)

Rubber
Rubber production, estimated at 51.5 million kg during the first half of 2000, indicated a marginal improvement over the same period in the previous year. The increase in production could have been much higher if not for the loss of tapping days due to rain.

Rubber prices, which remained depressed from 1996, commenced improving during the first half of 2000. The average price of RSS1 and RSS2 increased by 24 per cent each while latex crepe IX and latex crepe No.1 increased by 39 per cent and 42 per cent, respectively, at the Colombo Auctions. The increase in the price of natural rubber could be attributed to the sharp increase in the price of synthetic rubber due to the increase in petroleum prices. The increasing trend observed during the last few years in domestic consumption of rubber in the industrial sector continued during the first half of 2000 as well. Export volumes of rubber based goods have shown a significant improvement during the period under review compared to the previous year. Export volumes of tyres and tubes have increased by 49 per cent while other goods, which include surgical gloves, hoses, condoms etc., have shown a 15 per cent growth compared to the first half of the previous year.

The depressed prices that prevailed over a considerable period of time have had a negative impact on the replanting of rubber. Accordingly, the extent replanted declined by 22 per cent, to 171 hectares, during the period under review. The formation of ‘Thurusaviya’ Societies, for the purchase of rubber from smallholders and for the production of value added rubber goods, which commenced in 1999, continued during the first half of 2000 as well. By the end of June 2000, there were 245 ‘Thurusaviya’ Societies scattered in the Ratnapura, Kegalle, Kalutara, Colombo, Galle and Matara districts.
 
Coconut
Coconut production is estimated to have increased by 10 per cent to 1,392 million nuts during the first six months of 2000 compared with the production reported during the first half of the previous year. Favorable weather conditions that prevailed during the period, as well as the lagged effect of the well distributed rainfall which prevailed during the previous year, and the increased application of fertiliser contributed towards the improved output. In keeping with the increasing output of nuts, the production of all kernel products, except coconut oil, reported improvements during the first half of the year.

Desiccated coconut production increased significantly by 89 per cent, to 328 million nuts equivalent, during the first half of 2000. The production of coconut cream and milk powder increased by 18 per cent. Meanwhile, the exports of fresh nuts and copra reported increases of 33 per cent and 25 per cent, respectively. However, the production of coconut oil declined by 31 per cent compared to the same period in the previous year due to the closure of several oil mills as millers could not compete with cheap imported vegetable oils. Hence, with a view to helping coconut oil millers, the duty on edible oils was increased from 5 per cent to 25 per cent with effect from 7 February 2000. The prices of all three kernel products declined at the Colombo Auction compared to the first half of the previous year in the face of improved output in the Philippines and Indonesia. The average price of desiccated coconut declined by 31 per cent, while that of coconut oil declined by 32 per cent compared to the corresponding period in the previous year. In spite of the drop in prices, the export earnings from kernel products improved by 40 per cent in rupee terms (34 per cent in US dollar terms), as a result of an increase in the export volumes. The nut equivalent of exports of kernel products improved by 75 per cent compared to the   period in
the previous year.

The coconut development loan scheme, viz. the ‘Kapruka Ayojana’ programme, implemented by the Coconut Cultivation Board (CCB), progressed well during the first half of 2000. According to the CCB, the extents replanted and newly planted have improved by 25 per cent and 21 per cent, respectively, during the period under review. The production of genetically improved seedlings too reported a 3 per cent improvement during the first half of the year compared to the corresponding period in the previous year.

Loans granted under the ‘Kapruka Ayojana’ programme for the development of coconut lands amounted to approximately Rs.36 million during the first half of the year compared to Rs.20 million released during the same period in the previous year. According to the CCB, the number of loans granted under the programme during this period was 345 compared to 217 loans granted during the corresponding period in the previous year. Accordingly, 1,011 hectares of land have been developed during the first half of 2000 compared with 670 hectares developed during the corresponding period of the previous year.
 
Paddy
In spite of a drop in the extent sown and harvested, paddy production during Maha 1999/2000 increased by 1.6 per cent to 1,775 thousand metric tons purely due to an improvement in the yield. This was the third best Maha harvest recorded in Sri Lanka and it is only marginally below the peak output reported during the 1982/83 Maha season.

All the major paddy producing districts, except Ampara, reported improved outputs during the season compared to the previous Maha season. The paddy output in the districts of Kurunegala, Polonnaruwa, Mahaweli ‘H’ area and Anuradhapura, which together accounted for 42 per cent of the total output, reported increases of 12 per cent, 11 per cent, 9 per cent and 5 per cent, respectively. Both an improvement in the extent harvested as well as an improvement in yields have contributed towards the enhanced output in Anuradhapura, Polonnaruwa and the Mahaweli ‘H’ area. Meanwhile, the output in the Kurunegala District improved in spite of a decline in the extent harvested solely on account of a 14 per cent improvement in the yield. Paddy production in the Ampara District was affected by crop losses caused by un-seasonal rain prior to harvesting.

The overall average yield for the season, at 3,798 kg per hectare (74 bushels per acre), surpassed the former best Maha average yield reported in the 1986/87 Maha season by 3 per cent. The majority of districts reported yield improvements. The Mahaweli ‘H’ area, which had assured irrigation water, reported the best average yield of 5,156 kg per hectare (100 bushels per acre), closely followed by Uda Walawe at 5,024 kg per hectare (98 bushels per acre). This improvement in the average yield was attributed to improved cultural practices and the application of organic and inorganic fertiliser as a result of the ‘Yaya’ demonstration  programme. Fertiliser issues to paddy during the 1999/2000 Maha season improved by 7 per cent compared to the previous Maha season. Institutional credit granted to the paddy sector declined by 3 per cent to Rs. 201 million.

In order to stabilise domestic rice prices, the import duty on rice was reduced to 10 per cent from 35 per cent for the   23 October to 31 December 1999. This duty reduction had an adverse impact on the producer prices of paddy, particularly during the Maha harvest, as it gave an erroneous signal to the millers and stockiest who purchased paddy at attractive prices during the 1999 Yala season. Due to the availability of cheap imported rice some of the millers and stockiest who obtained pledge loans and stocked paddy during the Yala harvest faced difficulties in disposing of their paddy, which in turn made them reluctant to purchase paddy during the current Maha season. This reluctance of the wholesale buyers to purchase at a time of an improved harvest resulted in a sharp fall in producer prices during the harvesting period. In response to this development, the government intervened by purchasing paddy through the Co-operative Wholesale Establishment (CWE). However, CWE purchases were limited to less than 3 per cent of the Maha harvest, as its storage facilities were limited and allocated to stocks of already imported rice. As the producer price of paddy continued to be at a depressed level, the government imposed a ban on the import of rice with effect from 17 July 2000. These developments highlight the adverse implications of ad hoc changes in agriculture and trade policy to cater to short-term interests.

Other Field Crops
Production of other field crops reported a mixed performance during the 1999/2000 Maha season. According to the estimates of the Department of Census and Statistics, production of chillies, potato, red onion, maize,  , soya beans, sesame and kurakkan increased, while the production of black gram, cowpea and green gram declined compared to last Maha. Among the main cash crops, production of potatoes more than doubled due to an   extent of cultivation and improved yield. Production of red onion and chillies rose by 13 per cent and 2 per cent, respectively. Soya bean production increased, in spite of a decline in the extent, due to an increase in the yield. The decline in the production of black gram, cowpea and green gram was due to the reduction of extent under those crops.

With the increase in production, imports of potatoes and chillies during the first half of 2000 declined by 9 per cent to 63,000 metric tons and 6 per cent to 12,000 metric tons, respectively. However, imports of big onions rose by 26 per cent to 74,000 metric tons during the same period compared to the corresponding period of 1999. Due to lower domestic production, 1,400 metric tons of green gram and 720 metric tons of black gram were imported during the first half of the year.

Sugar
The estimated sugar production during the first half of 2000, at 24,793 metric tons, indicates a decline of 14 per cent. The entire drop in production is attributed to a 28 per cent reduction in the output at the Pelwatta factory, which accounted for 73 per cent of local production. Meanwhile, the Sevanagala factory, which accounted for 27 per cent of the total output, reported an 80 per cent increase in output. The increase in production at Sevanagala is mainly attributed to an improvement in the yield and an increase in the quantity of cane crushed as a result of an advancing of the harvesting season and increased private sector purchases. An improvement in the recovery rate also contributed positively towards the enhanced sugar output at Sevanagala. The drop in production at Pelwatta is due to an 18 per cent drop in the quantity of cane crushed as well as a drop in the sugar recovery rate from 8 to 7 per cent during this period. Cane available for  crushing at Pelwatta declined due to a drop in the yield as well as the extents harvested both at the nucleus estates and the settlers’ farms. Meanwhile, private cane purchases also declined by 12 per cent to 167,800 metric tons.

Sri Lanka produces only about 15 per cent of her requirements of sugar. International sugar prices increased from US dollars 168 per metric ton in January to US dollars 237 per metric ton by end June 2000. The quantity of sugar imported during the first half of 2000 increased by 45 per cent to 312,900 metric tons. However, a large quantity of sugar was imported during the early part of the year at a low price to restore stocks.

Fish
Fish production, estimated at 118,130 metric tons, recorded a lower growth rate of 2 per cent during the first half of 2000 compared to the 13 per cent increase recorded during the corresponding period of the previous year. This reflected largely the 2 per cent increase in marine fish production which accounted for nearly 90 per cent of total fish production. Marine fish production was affected by the lower fish yield reported during April-June (off season) period. Meanwhile, aquaculture fish production (inland and brackish water) maintained its growth momentum and increased by 13 per cent to 13,160 metric tons. With the slower growth in fish production, the average wholesale price of large species of fish increased by 16 per cent when compared to the first half of 1999. However, the average wholesale price of small species declined by 54 per cent highlighting the increased availability.

The subsidy schemes operated by the Ministry of Fisheries and Aquatic Resources Development to
uplift the living conditions of fisher folk continued. Under these subsidy schemes, 20 traditional craft, 3 outboard motors and 45 units of fishing gear were issued during the first half of the year compared with 52 traditional craft, 13 outboard motors and 7 units of fishing gear issued during the same period in the previous year.

The total quantity of fish exported during the period increased by more than 100 per cent to 8,740 metric tons, of which fresh and frozen fish accounted for 53 per cent and prawns accounted for 22 per cent. The value of fish exports also increased at a similar rate to Rs.4,677 million. The increase in marine fish production and recovery of the prawn industry from the white spot and yellow head diseases were the main reasons for the faster growth of fish exports. Meanwhile, total fish imports too increased by 33 per cent to 40,209 metric tons with a value of Rs.2,455 million.

Livestock
The livestock sector consists mainly of the dairy and the poultry sub sectors. In the dairy sector both cow milk and. buffalo milk production increased by 2 per cent each to 260 million liters and 82 million liters, respectively. Milk collection by the main processing companies namely, Kiriya Milk Industries of Lanka (Pvt.) Limited (KMILL), Nestle Lanka Limited (NLL), International Dairy Products Limited (IDPL) and other processors together amounted to 109 million litres indicating a 5 per cent reduction compared to the previous year. The main reason for the reduction in the collection of milk was the drop in collection by KMILL due to an industrial dispute, which hampered its milk collection programme. Of the total milk collection, KMILL accounted for 43 per cent while NLL and IDPL accounted for 26 per cent and 11 per cent, respectively.

KMILL had formed over 400 'Farmers Managed Societies' (FMS) by the end of the year to improve and promote milk collection at the village level. Under this system of milk collection, the quality of milk supplied by individual farmers is tested separately on a daily basis, and the payments are based on the fat percentage and SNF (solids non fat) percentage. This has resulted in an improvement in the quality of milk and an improvement in the incomes of the individual dairy farmers who supplied milk direct to KMILL rather than through a middleman.

At present, the country's milk supply is adequate to meet only about 20 to 25 per cent of the requirements. The balance is imported mostly in the form of powdered milk. During the year 54,000 metric tons of powdered milk were imported incurring an expenditure of Rs. 7,118 million.

The possibility of improving milk production by way of upgrading the local cattle stock and improving veterinary services should be looked into from the point of view of enhancing the nutritional standards of the population.

According to the estimates of the Department of Census and Statistics, national egg production during the year rose by 3 per cent to 898 million eggs. A major problem faced by the small-scale poultry producers is the high cost of feed. The cost of production of an egg is estimated to have risen by about 7 per cent to Rs.3.50 per egg.

Poultry meat production has shown a steady increase in the recent past and is fast becoming a common source of animal protein in the diet of the people. According to the estimates of the Ministry of Livestock Development and Estate Infrastructure, poultry meat production during the year increased by 10 per cent to approximately 57,000 million kg. In the face of import competition, some uneconomical poultry farmers have abandoned poultry farming.

Livestock is an essential component of agricultural activities and should come within the purview of the Ministry of Agriculture. Having both crops and livestock within the same ministry will be conducive to better crop livestock integration.

MINERAL RESOURCES (proven reserves)
Mining and quarrying accounts for over 6.5% of GDP.

Apatite, Dolomite, Feldspar, Graphite, Ilmentie, Industrial Clays, Kaoline, Limestone, Mica, Monazite, Peat, Phosphate Rock, Precious and Semiprecious Stones, Quartz, Rutile, Salt, Silica, Zircon. High Quality phosphate rock - 30 million tons (estimated reserves)