No rice for a rainy day
The price of rice suddenly took on an upward spiral in the markets, particular the price of coarse rice. Now, after the government clamped down hard, the price rise has abated somewhat. It will take time for the market to be stable again. It is the lower-income bracket that suffers, while certain unscrupulous quarters make big bucks.
The rice traders blame the government for not taking due measures in due time. And the government, in turn, blames the rice mill owners, the traders and even the media. There is no shortage of rice in the market, so the price hike is rather mysterious.
The crisis began towards the end of March when the boro rice crop was destroyed by floods in the haor (marsh) region. Up north too, large amounts of the crop was destroyed by the blast fungus. This caused a 2 million tonne fall in rice production, according to the food minister.
We are more or less self-sufficient in rice production. At the outset of our independence, there was a food shortage for the 75 million people of the country. The success of this country, now with a population of 160 million, is amazing. Production has tripled. According to Bangladesh Bureau of Statistics, in 2016 rice production was 35 million metric tonnes, of which 19.2 million tonnes was of the boro crop. This is our main crop. The government carries out a massive food grain procurement drive during this period.
The drop in food production naturally affected the government’s grain procurement drive. While the target for collection was about 900,000 tonnes, so far only 260,000 tonnes has been collected. This has pushed prices up in the open market. The millers are not able to provide rice at the government rate of Tk 32 per kg.
The inter-ministerial food planning monitoring unit determines the procurement target and price. The demand, stock and storage capacity is taken into consideration when determining the target. The procurement price is fixed by adding incentive to the production costs. But conditions on the ground can change. If the price of paddy and rice goes above the procurement price in the market, then it is unrealistic to expect to procure rice at the price agreed upon. If the procurement price is immediately readjusted, then there would be more rice in government stock. With sufficient stock, the government can intervene in the market system. Instead, the government opted to import rice. It is invariably difficult for the government to import rice during times of crisis.
When the traders take advantage of the situation and unfairly raise the price of rice, then there is very little to do if the stock is low. According to the food ministry website, on 19 September the stock was 356,000 tonnes of rice and 117,000 tonnes of wheat. Another 111,000 tonnes of rice waits unloading at the port.
The government has a storage capacity of 1.9 million tonnes of food grain. From rations to relief, all the government food distribution is from this stock. In order to keep the market stable, the government had a successful programme of Open Market Sales (OMS), selling food grain at low prices. If this can be run extensively for a month, the price of rice should fall.
Rice import by the private sector also has a positive impact on the market prices. That is why such import can be encouraged from time to time. It was done this time. Import duty on rice import was slashed from 28 per cent to 2 per cent. The banks were instructed to open LCs without any margin.
All this was done, but a bit too late. When the floods inundated the crops in the haors in March, it should have been realized then that a food shortage was looming large. Floods destroyed crops in the north too. Now those who grow rice, themselves have to be given rice trough the VGF system. This has put pressure on the stock. Rice for the 450,000 Rohingya refuges will also go from this stock. Duty was lowered from 1 July and there was an immediate flurry of import by the private sector. They have reportedly imported 600,000 tonnes of rice and 1 million tonnes of wheat according to updates.
Duty and taxes had been imposed on rice import in consideration of the farmers. Had the decisions of July been taken in April, this would have yielded greater results. The government could have procured rice through tender from the local importers too. They do so in the case of chemical fertiliser. That has proven to be successful and sustainable.
Food stock is piling up again. It is imperative to expand the OMS programme. There is a vast section of people who do not collect relief or VGF, yet they are needy. In consideration of them, the OMS programme must be run extensively. The government reportedly will do so shortly. But what has happened? Had there been adequate stock, the millers and traders could have been quelled. It seems that the decision of the latest high level meeting may yield results.
It needs to be seen who is responsible for this situation. There has been discussion on the government’s delayed measures. Lack of coordination among the ministries led to the delay. Then there are the unscrupulous traders who don’t miss the opportunity to cash in on the crisis. Legal measures need to be taken in such circumstances. Mobile courts have fined traders and mill owners who violate the law. Some DCs and SPs also have inspected the food stock in the mills. This is all very well, but long-experience as a DC says that the presence of rice-filled OMS trucks is more effective than the presence of the DCs and SPs. Extensive distribution of rice through VGF among the poor lowers pressure on the open market.
The mahajote or grand alliance government of Bangladesh Awami League (AL) is ruling the country at present. Awami League was in power during the 1998 floods too. For over a month at the time, 75 per cent of the country, including the capital city, was under water. Railway, road and air communication is disrupted. Some foreign media predicted that 20 million people would face famine. But in reality, we did not hear of even two people dying. The price of rice did not go up. No one could take advantage of the situation due to extensive government programmes.
It seems that the ruling party is shifting away from its previous priorities. This party had always placed the lower and lower middle class at the forefront. But now priority is being given to the traders and industrialists, Perhaps this is required to become an industrially developed wealthy country! But official statistics indicate that almost half of the government labour force is still involved in agriculture.
The media has also been held responsible for creating panic over the hike in rice prices. Some reports have an adverse effect on the market, no doubt. But the government website updates information on its food stock daily, so there can be no harm in reporting on this. Renowned economist Amartya Sen said that there can be no famine in a country that has a strong media and democracy. We were not even near a famine. But there was a shortfall in government food stock. Discussion in the media has helped the government in this regard. It is not untrue that the crisis was caused by the government’s failure to save up for the proverbial rainy day.
*Ali Imam Majumder is a former cabinet secretary and can be reached at [email protected]. This column, originally published in Prothom Alo Bangla print edition, has been rewritten in English by Ayesha Kabir.