Rice prices soaring, government stocks depleting

The price of rice is increasing in the market, and more concerning is that recent heavy rains and flash floods from upstream countries, including India, have damaged Aman rice plantations. The estimated production loss could be about 839,000 tonnes.

The Bangladesh Trade and Tariff Commission (BTTC), an organisation under the commerce ministry, analysed the situation and reported to the government that all duty and taxes should be removed to increase rice imports.

Rice is a sensitive commodity for the government, as a significant portion of the food expenditure of low-income families goes toward it. The price of rice is increasing at a time when the costs of almost all daily commodities—including edible oil, sugar, vegetables, eggs, and chicken—are also high.

Aman rice is the second major crop in Bangladesh. According to data from the Bangladesh Bureau of Statistics (BBS), the country produces about 40 million tonnes of rice annually, with approximately 15 million tonnes coming from the Aman season. Aman rice is likely to begin hitting the market in about three weeks.

Any disruption in rice production can lead to market instability. For example, in 2017, early floods affected Boro season production in the haor region, causing the price of coarse rice to increase from Tk 7 to 9 per kg within a week, ultimately exceeding Tk 50.

Meanwhile, the Directorate General of Food (DGF) reports that its rice stock has now dropped below 1 million tonnes, down from approximately 1.45 million tonnes on 15 August. Stocks are decreasing due to increased government distribution.

At the current allocation rate, a shortfall of 1.1 million tonnes of rice could occur by July next year. To address this, 1 million tonnes of rice need to be imported, considering safety stock and potential shortages. The private sector must also be encouraged to increase rice imports.

Moniruzzaman, director at the DGF, told Prothom Alo, “Rice production has been disrupted due to floods. We have written to the food ministry to alert them about the decrease in rice stocks. I hope the ministry will take proactive measures in this regard.”

The Tariff Commission report quoted the Trading Corporation of Bangladesh (TCB) stating that, compared to the same period last year, the price of rice is now 7 to 10 per cent higher. In the past month, prices have increased by up to 2 per cent.

According to TCB, coarse rice is currently selling at Tk 52 to 55 per kg, medium rice for Tk 58 to 63, and fine rice for Tk 72 to 80 per kg. Prices have risen by Tk 2 to 8 per kg in just one week, with the minimum price of fine rice increasing by Tk 8 to reach Tk 72.

The TCB also noted that since the new interim government took over on 8 August, the minimum price of coarse rice has risen by Tk 2 per kg, medium rice by Tk 4, and fine rice by Tk 12 per kg.

In Dhaka, at the two major wholesale rice markets – Babubazar-Badamtali and Mohammadpur Krishi Market – prices continue to climb. Traders from these markets cite two main reasons for the price increases: first, millers are raising prices due to higher paddy costs, and second, there are reports of reduced production in the Aman season.

Kawsar Rahman, the owner of Shilpi Rice Agency in Badamtali, told Prothom Alo that the supply of rice needs to be increased, emphasising that importing rice is necessary to address the shortage.

The tariff commission’s report provided an overview of the world market, noting that the price of rice is currently 11 per cent lower than it was a year ago in the international market. It has decreased by 4 to 5 per cent in the past month. However, despite these reductions, the cost of imports remains high.

The commission reports that the price of rice in Thailand is Tk 66 per kg. After calculating customs, taxes, and other costs, the price in Bangladesh would rise to Tk 92 to 95 per kg. If rice is imported from India, the initial price would be Tk 54 per kg, which would translate to Tk 75 to 78 after adding customs and other expenses.

According to the tariff commission, importing rice at these prices is challenging, and they recommend removing tariffs. BTTC chairman Moinul Khan stated to Prothom Alo, “It is now necessary to withdraw the duty to stabilise the rice market. This suggestion has been highlighted in our report on rice.”

On 20 October, the government reduced the duty on rice from 62.5 per cent to 25 per cent. However, the number of letters of credit (LCs) for rice imports has not increased. Data from Bangladesh Bank shows that LCs for importing only 26 tonnes of rice have been opened since the duty reduction.

The tariff commission has now recommended lifting the remaining customs duties, but only for a specified period. This report has been forwarded to the Ministry of Commerce, Ministry of Food, and the National Board of Revenue (NBR).

NBR chairman Abdur Rahman Khan told Prothom Alo on Tuesday, “Ensuring food security is our highest priority. As a result, we have recently implemented policy measures to reduce rice import duties in order to stabilise prices and supply. We will take further action if necessary. We are actively working on this, and something will happen soon.”

A report titled "Daily Foodgrain Situation" by the Ministry of Food highlights daily prices, stock levels, imports, and the world market situation. Publication of the report ceased at the end of the Awami League government's term, and it has not been resumed on the website since the new government took over.

However, a fortnightly report is still published, though it does not contain updated stock information. The latest report available on the ministry's website is from two months ago.

According to sources from the food directorate, the government plans to add 500,000 tonnes to its stock by purchasing from the local market during the Aman season, along with 1 million tonnes already in stock. An additional 600,000 tonnes is expected to be purchased in the upcoming Boro season. Distribution will also continue, but this may result in a shortage of 1.1 million tonnes of rice compared to the requirement. A stock of 1.5 million tonnes in government warehouses is considered safe during a crisis.

The food directorate indicates that importing large quantities of rice through open tenders is challenging. Instead, they suggest considering rice imports on a "G2G" basis (government to government agreement) by contacting the government of the exporting country.

In the financial year 2022-23, the government imported over 1.2 million tonnes of rice. For the next year, imports are expected to be less than 1,000 tonnes.

The price of rice in the market has been high for an extended period. According to the Trading Corporation of Bangladesh (TCB), the lowest price of coarse rice in January 2020 was Tk 30 per kg, driven by high production levels.

However, prices have now surged to over Tk 50. During the previous Awami League government, various attempts were made to reduce rice prices, but these efforts were unsuccessful. Instead, the government increased production costs for farmers by raising prices for fertilisers and diesel multiple times.

In 2007 and 2008, a rice shortage occurred during the tenure of the then caretaker government. At that time, the government struggled to import enough rice, even when willing to pay between 1,000 to 1,200 dollars per tonne (currently around 550 dollars).

Selim Raihan, a professor of Economics Department at Dhaka University and Executive Director of the South Asian Network on Economic Modeling (SANEM), told Prothom Alo that rice is a highly sensitive commodity. He noted that even if the government wishes to import rice suddenly, it is not feasible.

To control the market and prevent manipulation, supply must be increased. Raihan suggested that the government should provide rice to the poor at subsidised rates, and if funding is needed for this, expenditures in other sectors should be reduced.

He emphasised the importance of providing accurate data on the demand and production of key products, including rice. Raihan also stated that necessary preparations should be made now to encourage increased paddy cultivation in the upcoming Boro season.