Since rice is the staple diet and its cultivation is the main occupation of millions of small-scale producers the prices of both paddy and rice significantly affects the welfare of the people in Sri Lanka. Although prices are fixed by the government, it is contended that both the producers and consumers are exploited by the players involved in the value chain. This paper examines whether the structure of the paddy/rice market in Sri Lanka is competitive and efficient by undertaking two tracer surveys. The findings suggest that value chains are economically efficient: the profit margins accruing to almost all the players involved in the value chains are not excessive when compared with the bank rate of 15 per cent. There are concerns however, about the poor quality of rice milled by most small and medium scale traditional rice mills in the country. It was also disclosed that there is no hard and fast evidence to prove the allegation that the rice millers and wholesalers exploit both the rice producers and consumers by using oligopolistic practices in both the producer and consumer markets such as ‘cornering of the market’.

S M P Senanayake was formerly a Professor in Economics, Head of the Department of Economics and the Dean of the Faculty of Arts, University of Colombo. At present he is a Visiting Fellow of the Faculty of Graduate Studies of the University of Colombo. His contributions include 12 books and chapters in books, 24 articles in refereed journals (most of which are international journals), 18 research reports and 17 reports to the government and international agencies. His articles have been published in a number of reputed international journals such as the Food Policy, Savings and Development, Indian Journal of Agricultural Economics, Asia-Pacific Journal of Rural Development (APJORD) and UEH Journal of Economic Development. He is amongst the top most Agricultural Marketing Economists and Micro Finance Specialists in Sri Lanka at present. He has served many international agencies including the World Bank, Asian Development Bank, UNDP, FAO, ILO, IFAD, GTZ, SAARC and many others as a national / domestic consultant.