Bangladesh to buy rice from Indian govt traders at higher rate

The ministry of food in Bangladesh has started the process of importing 300,000 tonnes of parboiled rice from India. The government will purchase two-thirds of the rice directly from the Indian government in a government-to-government (G2G) transaction. The remaining 100,000 tonnes of rice will be bought through a global import tender.

The ministry will procure the rice from four Indian companies and the import process is in its final stage. However, Bangladesh is spending nearly US $40 more per tonne when buying from government-run Indian companies compared to the private traders.

A number of Indian media outlets have already ran stories on the discrepancy of the price between government and private companies.

A source at the food ministry said the rice the two private companies in India are selling at $393 and $397 per tonne is priced at $433.6 and $436.5 by the two government-run companies.

Bangladesh will buy 100,000 tonnes of rice each from the government-run companies and 50,000 tonnes from each of the two private companies. The food ministry and cabinet committee on public procurement has already approved the import order.

Food ministry secretary Mohammad Ismail Hossain told Prothom Alo, “The cost of rice fluctuates in every country. The talks to purchase rice through a governmental transaction began in last October. The talks were finalised in mid-December. The rate was fixed according to the export prices at the time. The global import tender was issued last December. By then, the price of rice had fallen. That’s why we could purchase rice at a lower price.”

In December last year, a six-member team led by food minister Sadhan Chandra Majumder and Mohammad Ismail Hossain toured Thailand, Vietnam and Cambodia to seek traders to import rice at a lower rate. But the team couldn’t secure a deal to import the requisite amount. So, the food ministry resumed the process of importing rice from India.

A source at the food ministry said that very soon the ministry will sign a deal with India’s National Co-operative Consumer Federation (NCCF) and their central reserves to purchase 100,000 tonnes of rice from each.

The directorate general of food issued a letter of intent (LoI) to both the companies on 21 December. Around 70 per cent of the imported rice will be brought via the Chattogram and Mongla ports. The remaining rice will come in trains. The companies are contractually obligated to deliver the rice within 70 days of the signing the agreement.

In the global import tender, the two Indian private companies proposed the lowest quotations and were given the contract. The companies are the Singapore-based Agro-Crop International Limited and Bagadiya Brothers.

Business Line, a newspaper owned by Indian media house the Hindu group, ran a report on 21 December on the difference of price between the government and private traders. They expressed shock at Bangladesh choosing to buy from the government traders over the private ones.

The report said the Indian co-operative traders are getting Rs 330 million more per 100,000 tonnes of rice. In total, the co-operatives will earn an extra Rs 660 million.

The report claimed that the government and private traders from India are selling rice at the lowest rate in the current global market and traders in Thailand, Vietnam and Myanmar traders are selling at a higher rate in comparison.

Former agriculture secretary AMM Shawkat Ali told Prothom Alo, “At a time when the country is going through a dollar crisis, the government should purchase rice at the cheapest rate possible. If the price of rice is going down, then they should wait for a bit and then buy rice.”

According to the United States Department of Agriculture (USDA), India will be the biggest global exporter of rice in the running fiscal year. China will buy 1.35 million tonnes of rice from India and Philippines and middle-eastern countries are also showing interest to buy rice from India.

As per the food ministry, currently around 1.4 million tonnes of rice is stored at government food reserves. The government distributes nearly 200,000 tonnes of rice every month as part of its social security programmes.

After the price of rice spiked in the country, the distribution amount was increased to 300,000 tonnes. That’s why, the government is trying to purchase from external sources to replenish the reserve.

*This report appeared in the print and online edition of Prothom Alo and has been rewritten for the English edition by Ashfaq-Ul-Alam Niloy