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The crisis that could have been avoided

  • Published at 12:48 am July 5th, 2017
  • Last updated at 01:54 pm July 5th, 2017
The crisis that could have been avoided
Bangladesh is seeing a record hike in rice prices this year, even after the harvest season, as the government reserve of rice has hit a record low in at least a decade. Rice traders and farmers say the government’s persistent stance against increasing its reserve by importing rice, keeping the import duty at 28% to restrict import by private traders, damage to boro paddy due to a recent flash flood in Haor areas, and a lack of monitoring over the private sector are the major reasons behind the crisis. According to the Ministry of Food, the current retail price of coarse rice is Tk48 – which is Tk18 higher than what the price was this time last year. Furthermore, on June 21, the government rice reserve stood at 173,000 tonnes – a whopping  445,000 tonnes less than the 618,000-tonne reserve on the same day last year. This situation did not arise overnight, but has been happening over the last six months, said market insiders, who blamed the government for overlooking the rapidly depleting government stock and not initiating the import of rice sooner. “The government is too late. It should have approached the international market for importing rice much sooner than it did when it noticed the depleting reserve,” said Quazi Shahabuddin, agricultural economist and former director general of Bangladesh Institute of Development Studies (BIDS). However, on Wednesday, Prime Minister Sheikh Hasina said at parliament that the country was currently not facing a crisis of its staple food. She said as of June 28, the government reserve stood at 188,000 tonnes of rice, whereas the government-approved rice mills had around 5.4 million tonnes in stock and the retail-wholesale markets had a further 5 million tonnes. [caption id="attachment_72686" align="aligncenter" width="900"]IMGL3993 According to the Ministry of Agriculture, Bangladesh lost around two million tonnes of paddy during the boro season in April-May – the highest yielding season of paddy in a year – due to the flash flood in Haor basin and a blast disease epidemic in different regions Syed Zakir Hossain[/caption] Where did the paddy go? According to the Ministry of Agriculture, Bangladesh lost around two million tonnes of paddy during the boro season in April-May – the highest yielding season of paddy in a year – due to the flash flood in Haor basin and a blast disease epidemic in different regions. Ministry data shows the boro yield last year was 19 million tonnes. Taking that into account, right now the country should have roughly around 17 million tonnes of paddy. Like every year, the government has been procuring boro rice and paddy for its own reserve since May 2, with the target of procuring 800,000 tonnes of rice and 700,000 tonnes of paddy by August 1, mostly to run its social safety net programme and emergency disaster relief. But as of now, the government has managed to procure only 49,159 tonnes of rice – a measly amount compared to last year’s procurement of around 1 million tonnes. Owners of rice mills, from whom the government is procuring the rice this year, claim that there is not enough paddy in the local market, which is why they are unable to supply the rice to the government. “This year, we do not have enough stock to run our business for long,” said Nirod Boron Saha, president of Naogaon Rice Wholesalers’ Association. Asked where all the paddy has gone just two months after harvest, Nirod said: “Some unscrupulous traders and farmers may have hoarded the paddy as the price was good during the harvest period.” Millers irked by govt procurement rate Another reason why the rice mill owners have backtracked from supplying rice to the government reserve is the procurement rate set by the government, said Nirod. For this boro season, the government has fixed the procurement price as Tk24 per kg of paddy and Tk34 per kg of rice. These rates contradict with the “paddy-to-rice conversion” method and will cause losses to the millers, he added. “A maund (around 37.32kg) of rice is produced from around a maund and a half of paddy. If the price of paddy is Tk24 per kg, naturally the price of rice will be Tk36,” he explained. “If the government rates are to be followed, millers will have to count a Tk2 loss per kg of rice that they supply to the government reserve.” Because of these “ridiculous” rates, the government would not get rice from the millers this season, Nirod told the Dhaka Tribune. Import is the solution To overcome the current situation, the government has already initiated import of rice from different countries, including Vietnam and India. An agreement to this end has been signed with Vietnam, while the authorities concerned are looking into the Indian market. In addition, the government has cut down the import duty on rice to 10% from 28% so the private sector can immediately start importing rice. However, this year rice price is higher in the international market as well. A tonne of rice is priced at around $410-450 in India, Vietnam, Pakistan and Thailand, which means the price of imported rice in the local market would be around Tk36-42 per kg, according to the Ministry of Food. Market insiders believe the upward trend of rice price will continue, or at least the current situation will remain as it is, if the government fails to control the market by importing enough amount of rice. Agricultural economist Quazi Shahabuddin said importing rice is the only option for the government to tackle the situation at the moment. He advised the government to reduce the import duty down to zero so private sector importers could make some profit, seeing as rice prices are high in the global market as well. Nirod Boron Saha agreed. “The government should also increase the number of beneficiaries in and the amount of rice allotted to its social safety net programme to reduce the demand in the local market,” he added.
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