The country’s rice reserves are in surplus and the boro harvest is around the corner. Prices are almost half the cost of production. Yet according to the food ministry, 200,000 tonnes of rice was imported through government and private channels over the past 10 months. Another 380,000 tonnes are in the import pipeline.
After the haors (marshes) were flooded in May 2017, the government lifted import duty on rice to meet the estimated shortfall of 1 million tonnes of the food grain. But over the past two years, around 6 million tonnes has been imported.
In order to halt this surge in imports, the government re-imposed the 28 per cent import duty. Imports slowed, but have not stopped. With surplus production and continued imports, prices are falling steadily.
According to official and unofficial reports, there is a surplus of 2.5 million to 3 million tonnes of rice in the country at present. The agriculture ministry is even considering export. Economists are baffled at why, under these circumstances, rice is still being imported.
Agriculture minister Abdur Razzak, speaking to Prothom Alo, said it is basically because of the surplus that the price of rice is not increasing. The boro harvest will come in over the next 10 to 15 days. If all goes well, the government will decide to export food grain. This may push prices up.
Concerning the import of rice despite surplus, the minister said, the five-star hotels and the wealthy persons of the country only consume fine grain fragrant rice. Perhaps the imports are to meet their needs. But if imports are in excess, the government will consider increasing the 28 per cent duty.
According to a 2016 study conducted by the Centre for Policy Dialogue (CPD) on capital flight from Bangladesh, it was said that the rice imported by Bangladesh in 2013-15 cost 800 to 1000 USD per tonne, but in the international market the price was only 500 dollars per tonne. The CPD report indicated that this surplus revenue was illegally siphoned off abroad.
CPD distinguished fellow Mustafizur Rahman told Prothom Alo that the the government should take speedy measures to procure food grain and to increase the stock. This may have a positive impact on the market. And duty can be hiked to discourage import.
Also, he said, there should be an investigation to check whether money is being smuggled out of the country in the name of imports.
No impact of govt procurement on market
The government set the target to procure 1.3 million tonnes of rice from May this year, for three months. Half of May has passed, but so far only 1269 tonnes has been procured. Most of the rice mill owners have not even begun buying rice from the market.
Almost all the 16,000 rice mills of the country are normally ready at this time of the year to meet the impending boro harvest. However, at present only around 1000 mills are operating. The owners say that they still haven’t sold the old stock and so are not purchasing paddy (dhan) anew.
Economists explain the reason why the government procurement does not impact market prices, saying that they the government basically buys the rice from the rice mill owners. The government every year announces it will procure 100,000 tonnes directly from the farmers, but this never happens. So rice prices are always controlled by a group of the big rice mill owners.
Former research director of Bangladesh Institute of Development Studies (BIDS), M Asaduzzaman, told Prothom Alo, the government should have shown at this moment that they are actively endeavouring to increase rice prices. However, they haven’t even asked the rice mill owners why they are not purchasing paddy from the farmers. They should see whether these owners are intentionally not purchasing the paddy in order to decrease prices further.
Bumper production and bumper loss
The US Department of Agriculture (USDA), in a report published this month about the global production of food grain, has said that Bangladesh rice production has increased by 7.2 per cent over the past year. This year its rice production may reach 35.6 million tonnes, highest among the world’s main rice producing countries.
According to the agriculture ministry, 36 taka was spent on the production of 1 kg of rice in the boro season, but government procurement prices are lower than production costs. They have kept no profit margin for the farmers.
BIDS director general KAS Morshed, speaking to Prothom Alo, said rice prices are low all over the world, not only in Bangladesh. Even a few months ago, rice prices were not so low. If the prices are high, the government can do a lot of things, but it is difficult to push prices up.
"When rice was being imported in large volumes, they should have thought about prices dropping when the harvest comes in. The government should now take some quick steps to step up rice procurement, and then also take long term measures for procurement," he added.
*This report, originally published in Prothom Alo print edition, has been re-written in English by Ayesha Kabir.