Rice mill owners profit Tk 8-14 per kg

Rice mill owners profit Tk 8 to Tk 13.66 per kg from rice and its by-products during the change of hands for five times from the farmers to the consumers, according to a study of BRRI.

They profit the most and abnormally as the cost and profit are added during every time of change of hands.

The rice-mill owners sell the by-products of rice separately. Despite making an additional profit they are not reducing the rice price, rather they raise the price every time the price of rice goes up or the price of paddy goes up in the open market.

This information came up in a recent study conducted by the Bangladesh Rice Research Institute (BRRI).

The study titled “a survey on the rise of rice price: status from farmer to consumer level” was led by the Agricultural Economics Division of the BRRI.

The study says around 600 to 650 grams of rice is produced from a kg of paddy. The rice-mill owners show a profit of Tk one or two on that amount of rice. However, they sell the by-products of rice, including rice dust, broken rice and the trimmed top of rice, at a price between Tk six to nine.

Thus, the rice mill owners are making abnormal profits.

The study suggests that the owners of the rice mills should reduce the price at mill gates.

Speaking to Prothom Alo, Shahjahan Kabir, director general of BRRI, said, “We have maintained international standards during the research to understand the reasons behind the hike in the price of rice in the country. Reviewing other studies on the rice market we have found that the price of rice is rising rapidly mainly due to the rice mill owners.”

“Therefore, the rice mills should give an account on how much they spend to produce rice from paddy and how much profit they are making from rice and its by-products. At the same time, the food ministry should take initiatives to bring down the rice price at the mill gates,” he added.

The institute has taken data and technical assistance from the Department of Agricultural Extension (DAE), Department of Agricultural Marketing (DAM), the Food Planning and Distribution Unit under the food ministry.

Humnath Bhandari, country representative of IRRI (IRRI) in Bangladesh and professor Jahangir Alam of the agricultural economics department at the Bangladesh Agricultural University provided technical assistance during the study.

Asked about this, KM Layek, general secretary of Bangladesh Auto, Major & Hasking Mill Malik Samiti, told Prothom Alo, “The information that the mill owners are profiting abnormally, which came up in the study, is not true. The rice mill owners invest in different sectors and even take loans from the banks to run their mills. If we really were making that much profit, then 90 per cent of the owners would not have to default bank loans or most of the mills would not be closed down. Therefore, the researchers should verify the data with more scrutiny.”

The average daily per head consumption of rice has been estimated through the field survey in the study. It shows that a man or woman used to have 384 grams of rice per day on average in 2019, which rose to 405 grams, 411 grams and 409 grams in 2020, 2021 and in 2022 respectively after the outbreak of the coronavirus pandemic in the country.

The rice consumption rate has increased by 6.13 per cent in the rural areas and 4.48 per cent in the cities.

Explaining the increase in the consumption of coarse rice, the study says the people below the poverty line are in the most vulnerable condition due to rice price hike. In 2019, a worker could buy 13 kg rice with his or her daily wage which will be reduced to 8 kg by 2022. Some 10 per cent of the buyers of medium quality rice are turning to coarse rice or low quality rice due to rise in the prices. Therefore, the price of coarse rice is also increasing on a regular basis.

Assessing the food situation in the country, the study says that food security cannot be ensured only by increasing the domestic food production or just by increasing the supply by importing products as per the demand. To achieve that people’s purchase capacity needs to be increased or food products should be made available through the social safety net programmes.

Economist M Asaduzzaman, former research director of Bangladesh Institute of Development Studies (BIDS), told Prothom Alo that the government should clarify its steps for establishing control over the rice mill owners. The food ministry also has the responsibility to find out the reason behind the price hike. People are consuming rice more as the cost of flour, edible oil, daal (lentil) and other products has increased. It could be a reason for the price hike. There should be an assessment as to where the prices are rising and how much and its impact on the poor. After that, the government should take initiatives in this regard accordingly.

The experts say a man needs a maximum of 350 grams of rice daily for healthy growth. If it is more than this, it is harmful to the body as it reduces people’s work capacity and increases the risk of various diseases, including diabetes and high blood pressure.

The BRRI conducted the survey on 2028 people from February to June this year. Most of these people were farmers and consumers. The research has been conducted on the basis of group discussions, interviews and by analysing the research data of several other government and private agencies.

It says the gross production of rice in 1971 was 10,590,000 tonnes. The rice production this year will be 36,000,000 tonnes. It states that rice production is increasing at a higher rate than the country's population growth, and therefore the country has enough rice as compared to demand at the moment.

According to the study, some 62 per cent of the yearly gross rice production of 36,000,000 tonnes was sold in the market last year, which rose to the highest 66.2 per cent during the Boro season. Meanwhile, a crisis of rice emerged in the country after the outbreak of the coronavirus pandemic which sparked rumours surrounding the price and stock of rice. Following that, the farmers and businessmen released rice in the market at a slow pace. As a result, the country witnessed a crisis of rice and a steep rise in the prices. Even the government’s drive to collect paddy at the time also went in vain.

The research shows that there are mainly five parties who are involved in the rice market. First, the farmers, second, the middleman, third, the whole sellers, fourth, the rice mill owners and fifth, the retailers. Among them, the middlemen make the lowest profit. They profit around 50 to 65 paisa per kg rice.

The research identified the rice mill owners as the most influential party in the rice market. They invest large sums of money in this business. They spend money for different purposes, including purchasing machinery, buying paddy, storing them, electricity bills and wages of the labourers and employees. With the additional profit from the by-products, they make a gross profit of Tk 8 to Tk 13.66 per kg rice.

The retailers purchase rice from the wholesalers and sell them to customers. They make the lowest profit from selling coarse rice while they get more profit from selling fine rice. In the aman season they make a profit of around Tk 2 to over 7 per kg coarse rice. The profit from per kg coarse rice rose to Tk 3 to 4.61 in the Boro season. The main expenses of these traders are shop rent, employees' salary and other expenses.

According to the research, the farmers usually get a profit of Tk 2 to Tk 4.5 per kg of paddy. However, this estimation excludes the land rent and the farmers' own labour. If these expenses were included, the farmer's profit would shrink to Tk 1 or Tk 2.

When asked about this, economist Qazi Kholiquzzaman Ahmad told Prothom Alo that rice mill owners have become much stronger than before.

Being financially, socially and politically powerful, they have established control over the rice market by investing heavily. The food ministry should take the initiative to reduce the price through discussion with the rice mill owners and pressure has to be given if necessary.

*This report appeared in the print and online edition of Prothom Alo and has been rewritten in English by Ashish Basu