Turmeric: the new gold?
Turmeric, or “kaha” [Sinhala], “mancal” [Tamil] as it is known in the vernacular, is a staple in Sri Lankan cuisine. It is used in almost all the “curries” eaten with the island’s standard meal – “rice and curry”.
A global ‘superfood’, turmeric draws its bright yellow colour and the aroma from the roots of the plant. Basic nutritional aspects of 100g of turmeric include 340 percent of the daily recommended intake of manganese and 517 percent of iron. It is also an excellent source of fibre, vitamin B6, potassium, vitamin C, and magnesium. It has two therapeutic components – turmerone and curcumin, and it is the latter that gives turmeric its super-powers. Turmeric is known to help with inflammation, arthritis and generalized joint swelling; stabilize blood glucose levels; support immune function; and alleviate conditions ranging from liver issues, skin conditions, mood stabilization and even cancer.
Raw turmeric roots on the carts of roadside vendors have been a common sight in Sri Lankan cities ever since the beginning of this year. This is unprecedented, given that Sri Lanka has been relying heavily on imported turmeric from India for decades. The domestic production was only 2,000 of the 7,000 tonnes Sri Lankans consume annually. Sri Lankans, especially those living in urban areas probably had no imagination of what turmeric looked like in its tuberous form before 2021.
A year ago, in July 2020, the Government of Sri Lanka banned the importation of turmeric and other key spices such as pepper, arecanut, cinnamon, nutmeg, mace, cardamon, ginger, and cloves. It was a move to increase local production and protect small-scale farmers from the adverse effects of the COVID-19 pandemic on the economy. The ban on turmeric imports also took place in a context where Sri Lanka faces a severe foreign exchange crisis.
Before the ban, the wholesale price of turmeric was on average Rs. 80 per kilo, but with the import regulation, the demand for turmeric has skyrocketed, much in favour of small-scale farmers. After the spring harvest of 2021, the price multiplied 275 percent to the current average of Rs. 300 per kilo. Online shoppers can now purchase a 100g pack of turmeric powder at the high-end Spar supermarket for Rs. 750, an 80g bottle at Daraz.lk for Rs. 985, and a 50g pack at Cargill’s for Rs. 350.
The ban has been a blessing for turmeric farmers across the island. One such success story is in the remote village of Gonagala in Ampara district. Though predominantly rice cultivators, farmers in this area have been growing turmeric and other field crops using traditional methods for generations. In 2019, long before the import ban, the Smallholder Agribusiness Partnerships Programme (SAPP), a collaboration between the International Fund for Agriculture Development (IFAD) and the Government of Sri Lanka, had begun working with farmers in Gonagala. SAPP staff had come to help the farmers of Gonagala strengthen their turmeric business. Therefore, before the ban, they were already growing a high-quality form of turmeric fertilized only with traditional and organic manure. This variety of turmeric, known for its high potency, is endemic to the island. It has a greater concentration of curcumin, and a deep yellow-orange hue. Although one would expect high returns from a highly marketable product of this nature, at the time, it was not the farmers but the resellers that benefited most from it.
SAPP had grand plans to assist the farmers orient their production by improving market access, and introducing strategies to get their turmeric into high-end sale points. They focused on value addition and encouraged the farmers to process the raw turmeric into powder prior to sale. The processing centre in the village, however, was in a dilapidated state and they no longer could maintain it. But with the financial support of SAPP and the Rural Development Bank of Sri Lanka, the villagers succeeded in renovating the facility. They even purchased new machines to process the turmeric.
Just as they were nearing the first harvest after the SAPP interventions, the COVID-19 pandemic loomed over the island and Sri Lanka went into a 2 ½ month lockdown. The SAPP team, however, was resolute and even visited Gonagala during the lockdown. By that time, the farmers had serious concerns that they will not be able to sell their harvest. Right on time came the import ban and the demand for turmeric increased by the day. Farmers of Gonagala who typically earned Rs.50 per kilo of raw turmeric started getting Rs. 250-300 per kilo. They started to see immediate benefits. Their household incomes got a significant boost even during a pandemic, and many of the families were able to repay bank loans and release their lands from mortgages. Some even purchased motorbikes and trishaws with their surplus income.
The effects of the import ban on the lives of farmers in Gonagala can be thought of as much-awaited reparation for what they had to endure as those living in a “border village” during the civil war in Sri Lanka. Some among us may have already erased the “Gonagala Massacre” on 18th September 1999 from our memory of the war. According to the reports, over 50 men, women and children were hacked to death by the Liberation Tigers of the Tamil Eelam (LTTE), with knives, machetes, and firearms while they were sleeping. This massacre gained particular notoriety because most of the LTTE cadres who carried out the murders were women. This brutal incident and its immediate aftermath is depicted in the Sinhala-language film “Gamani” (2011).
The import ban and the subsequent rise in the demand for turmeric has motivated many other farmers in the area to grow turmeric again, using only organic fertilizer such as cow manure which is in plentiful supply in the rural countryside. In the last quarter, an estimated 2,000 kilos of what has become the “new gold” was harvested from 150 kilos of turmeric seeds. The success of 100 farmers from Gonagala has inspired 150 others from the surrounding areas to join the SAPP project, and the latter is now working across five districts in Sri Lanka helping people cultivate turmeric. In Gonagala, plans are underway to establish a village cooperative centre and a turmeric federation.
The initial reaction to the ban was an increase in black-market sales, as is the case with any import control. A number of importers in Sri Lanka import spices from India, and by 2017, 97% of turmeric imports came from India. Immediately after the ban, there were several reported cases of wheat flour mixed with yellow dye making its way to the shop shelves caused alarm over food safety issues with regard to turmeric imports. Sri Lankan security forces were engaged in a series of operations to crack down on smugglers bringing turmeric into the country by boat from India, and several individuals were arrested during these missions. The Sri Lankan Navy reported that it intercepted and seized 7,552 kilos of smuggled turmeric between July and August 2020.
For the year 2017, India had 66.39 percent market share of the world turmeric export and its Relative Comparative Advantage (RCA) value was 39.40 (Trade Map Data, 2017). In comparison, Sri Lanka’s market share was 0.25 percent, and the RCA value was 3.68 (ibid.). Currently, India has 78 percent market share.
Believers in David Ricardo’s (1821) trade theory of “Comparative Advantage” may well disqualify Sri Lanka’s move to ban turmeric imports from India. Their argument being import ban “distorts” Sri Lanka’s comparative advantage in buying turmeric from India. Ricardo argues that if protection is removed, resources would be expected to move away from high cost to low-cost products and as a result productivity would rise. His comparative advantage theory advocating in favour of a free trade model is part of the argument implied generally to defend laissez faire. Protection is seen as interference in the free play of market forces.
This is not the case in a developing country such as Sri Lanka, where unemployment is high, and the utilization of potential surplus and resources is low. This goes against Ricardo’s model where he assumes that all resources are fully employed. It also assumes that with the adoption of free trade policies, exports will pay for imports so that exports of those commodities in which the country has a comparative advantage will increase. However, the value of exports from developing countries largely depends on world market demands and the prices of other rival suppliers. Free trade has been a powerful mantra over the last three decades for international organisations such as the IMF, the World Bank and WTO (World Bank, 2002; WTO, 2015). Despite the lack of any empirical evidence and far from reality, mainstream economists and international organisations claim that trade liberalisation and de-regulation have produced benefits. Therefore, the blind application of the theory to argue that the import ban “distorts” Sri Lanka’s comparative advantage in buying turmeric from India is unwise.
The cultivation of turmeric is not costly, nor is it tedious. It takes 9-12 months to harvest. It is true however, that high standards must be set for cleaning, drying, and packaging in order to maintain the quality and ensure that it is free of contamination. Small-scale farmers who cultivate turmeric typically do so in less than 2 hectares of land, and there are only about 2,000 hectares of land on which turmeric is cultivated. The ban has boosted local production and has uplifted the income of turmeric farmers.
The ban, however, is not without its challenges. Rising turmeric prices has taken a toll on the consumer, to the extent that some refer to the ban as an “anti-poor” measure. In response, the Consumer Affairs Authority (CAA) announced a maximum retail price (MRP) for turmeric powder at Rs. 750 per kilo. Wholesalers criticize the move on the basis that a control price on turmeric powder does not make sense without imposing a control price on raw turmeric.
The Government of Sri Lanka has historically resorted to import controls as a way of managing balance of payment crises. The current import controls, including the ban on turmeric, is no different. This policy may not be sustainable for all products in the long run. The export sector in particular, depends on imports for raw material and machinery, and a removal of trade barriers on certain goods may be inevitable. Moreover, a continued policy of import control may cause tariff retaliation by trading partners, which in turn will have an adverse impact on domestic manufacturing for export. In the long-run, it may hinder Sri Lanka’s opportunities to participate in the rule-based ‘free’ trade system which has for decades worked only in favour of Western industrialized countries.
Nevertheless, it is important to celebrate the honeymoon created by the turmeric ban, which has, at least in the short-term, increased household incomes of rural small-scale farmers. Relaxing the ban, not lifting it completely, may be a pragmatic policy measure that will work in favour of consumers. But the turmeric farmers need not lose hope! The honeymoon period has brought the high quality Sri Lankan turmeric into the limelight, positioning it as a potential exclusive spice export. Similar to Ceylon cinnamon, Ceylon turmeric may well be on its way to the shelves of exclusive boutiques in wealthy countries. Economies of scale has and will never work in favour of countries like Sri Lanka. Our forte has always been premium quality, niche, and boutique products. Turmeric has the potential to be Sri Lanka’s next deluxe export.
Written by Vagisha Gunasekara