Agriculture plays an important role in the Sri Lankan economy despite the decline in national output and the shift to industrial and service sectors. The sector is critical in sustaining the country's food supply and also provides employment opportunities in the rural sector. The report studies the profitability of paddy farming over the years and the policy changes that have occurred. Governments have always treated agriculture as a subsidy-driven sector and executed measures to provide incentives to protect farmers. However, the rise in the cost of living has affected the farmers and in 2011/12, the Maha season was affected by the devaluation of the rupee. The rapid rise in fuel prices, fertilizer costs and other essentials have made paddy profitability nearly unviable. The report has been structured based on a detailed questionnaire survey of over three hundred paddy farmers in the Ampara, Anuradhapura, Hambantota and Polonnaruwa districts. The data has been analysed using simple statistical techniques. Primary and secondary data were also analysed to identify correlations between prices and yield and other measurable indicators.