20th Anniversary Suppliments Archive

Coping with rising rice price

M. Abdul Latif Mondal

Photo: Star

AN English-language daily (The Financial Express) of February 14 carried a report which said that a high-level meeting held recently at the prime minister's office decided to go for urgent procurement of rice between 8 and 10 lakh tonnes from international markets bypassing bidding process, if necessary, in order to increase the government food grain security stock which, according to a paper placed in the meeting by the food ministry, stood at 4.88 lakh tonnes at the moment. The paper said that imports of rice on urgent basis will help gear up social safety net programmes for the vulnerable groups and bring down the soaring prices of rice in the local market. The meeting presided over by the principal secretary to the prime minister was attended by the secretaries of various ministries including food, agriculture, commerce, shipping and industries.

Ensuring the provision of the basic necessities of life, including food is the constitutional obligation [Article 15 (a)] of any government, and we fully agree with the prime minister's statement in the just concluded eighth session of the ninth Parliament that “the government will ensure food for people at any cost, even by stopping all development activities, if necessary”.

The question that, however, agitates informed people's mind is that why there is urgent need for such a huge import of rice from international markets “bypassing bidding process, if necessary” when the government claimed that the last two major rice crops---boro and aman---achieved production target.

Secondly, against total production of 331.58 lakh tonnes of food grains, including about 10 lakh tonnes of wheat in 2010, yearly food grain availability for human consumption stands at 291.80 lakh tonnes after deduction of 12 percent for feed, seed and wastage. At government estimated per capita daily intake of 489 grams, yearly requirement for 149 million people comes to 266 lakh tonnes, which means a surplus of 25.80 lakh tonnes. Addition of 135 lakh tonnes or so from this year's (2011) aman and 6.09 lakh tonnes of rice and 19.84 lakh tonnes of wheat imported this fiscal year by the government and private sector arguably brings the food grain availability position to a comfortable level.

The prevailing shortage of supply of rice and high prices of its different varieties, particularly of coarse rice at Tk. 34-37 a kg in local markets leads to conclusions that (a) the published domestic food grain production figure might not have reflected the actual production: (b) the deduction of 12% from the gross domestic production for seed, feed and wastage has not been correctly worked out; (c) the determination of per capita daily requirement of food grain at 489 gram is not based on reality; and (d) government figure on the country's population is not correct.

The government claims that rising prices of different varieties of rice in the international markets have contributed to price hike of rice in domestic market. Let us see as to what extent the government claim is true.

FAO Food Price Index released on February 3 says that the FAO Cereal Price Index averaged 245 points in January, up 3 percent from December. The increase in January mostly reflected continuing increases in international prices of wheat and maize, amid tightening supplies, while rice prices fell slightly, as the timing coincides with the harvesting of main crops in major exporting countries.

In its December issue, InterRice, an UNCTAD monthly report of the world market of rice, says that in December, the world prices started to decrease, but the fall was not enough to make up for November's firm prices. In 2011, the exportable supply is likely to be large, what may lead world prices to drop further in the following months.

The current issue of Rice Outlook, which contains, inter alia, information on U.S. rough, milled, medium, and short-grain rice, says that trading prices for Thailand's high-and medium quality grades of non-specialty rice have increased 2 to 4 percent from the second week of January. In contrast, Vietnam's price quotes have declined slightly in recent weeks. Price quotes for U.S. long-grain milled rice have continued their slide over the past month, with large domestic supplies and some quality concerns weighing heavily on market.

Food and Disaster Management Ministry's Fortnightly Foodgrain Outlook of 2 February says that in the fortnight ending on January 26, Thai 100% rice experienced -0.55% decline while the Thai 5%rice remained at the same level. It also says that Cambodia is aiming to quadruple its global exports in 2011.

International rice output in 2010-11 is estimated at 466 million tonnes, up 2.3% from 2009-10.

Quoting from Tariff Commission's report, Prothom Alo wrote on January 22 that the increase in the prices of rice in Bangladesh was much more than the increase in the world markets during the last year. The report said that during the period of one year ending on last January 20, prices of fine, medium and coarse rice in international markets increased by 8.40%, 9.19% and 11.67% respectively, while in Bangladesh the prices of fine, medium and coarse rice increased by 20%, 25% and 33.33% respectively during the same period.

The actual problem is the shortage of supply of rice in the local markets. Taking advantage of the absence of the government programme for procurement of aman this year, rice traders and rice-millers, the only players in the market, purchased huge quantity of paddy and rice from farmers at relatively lower price for hoarding, anticipating windfall profit in March-April when price of rice generally remains higher than that of the harvesting period. Newspaper reports suggest that they are still the main buyers in the local rice markets. Absence of any anti-hoarding law and granting of loans by the commercial banks on easy terms encouraged them in the execution of their design.

Although the Food Minister said in September last that the government was going to reactivate East Bengal (Foodstuffs) Price Control and Anti-Hoarding Order, 1953 with necessary amendments, nothing is known about its progress. Critics say that the government might have shelved the idea due to resistance from the business community. The earlier instruction from Bangladesh Bank asking the commercial banks to shorten the period of repayment of loans by rice traders and rice-millers is known to have been recently revised allowing them longer period for repayment of such loans.

The price and supply situation of food grains, particularly of rice, in the market has come to such a pass that the government has no other alternative but to go for procurement of rice from abroad. However, informed people smell a rat in the proposition for procurement of rice from international markets “bypassing bidding process, if necessary,” and they suggest that government to government purchase should be preferred.

The writer is former Secretary, Ministry of Food.