• Tuesday, Aug 16, 2022
  • Last Update : 04:24 pm

News Analysis: Why buy from millers, why not from farmers?

  • Published at 05:25 pm April 24th, 2021
Photo: Mahmud Hossain Opu/Dhaka Tribune

Much of the govt’s price support goes into the hands of the millers while only a small part of it goes to the farmers

Each year a cabinet committee meets during late March or early April to determine the volume of Boro rice that the government intends to buy from the paddy growers and fix the price it can offer them.

But this year, the meeting of the Food Planning and Monitoring Committee (FPMC) was held after a long delay -- on April 22. And two days after the meeting, the cabinet body was still to officially announce a decision.

Ministers of food, agriculture, finance, commerce, fisheries and livestock, among others, sit in the FPMC meeting.

Meeting sources confirmed that while the ministers agreed on the volume to be purchased from farmers and rice millers, they failed to agree on the price offer. That is what is causing this unusual delay in announcing the Boro procurement decision.

While the Food Ministry is insisting on offering the millers Tk. 40 for each kilogram of rice, Finance has its observation that such a "high" price offer would adversely impact food price inflation.

There seems no disagreement among all the stakeholder ministries on offering only Tk. 26 to farmers for each kilogram of paddy.

Why buy from millers?

The crux of the matter lies with Bangladesh’s food department’s faulty approach to rice procurement. Our government’s domestic food procurement drive is excessively biased towards rice millers and unfair to the paddy growers.

Year after year, much of the government’s price support (in terms of buying crops) goes into the hands of several thousand millers while only a small part of it goes directly to the farmers.

This is a recipe for failure.

Take last Aman season for example. Government said it would buy 800,000 tons of paddy and rice -- and a major portion of it in rice form from the millers. But at the end of procurement season, it ended up buying only 83,000 tons. This happened because millers held the government hostage, saying they wouldn’t sell rice to public silos if higher prices weren’t offered to them. Whereas, farmers were ready to sell paddy directly to the government but the latter has never developed a mechanism where it can buy paddy directly from farmers and convert the same into rice by employing millers in exchange of a certain milling charge.

A policy shift is imperative

What does it take to buy paddy from the farmers and provide them the price support instead of buying rice from millers, thereby only benefitting the latter? Is it too difficult a task? Or, a simple policy shift can make a good difference?

In 2019, the Washington-based food policy think tank – IFPRI (International Food Policy Research Institute) commissioned a study in the Indian state of West Bengal to understand how paddy is procured directly from farmers.

It found out that since 2016-2017, the West Bengal state government has implemented an electronic paddy procurement (e-procurement) system. Between 2017-2018 and 2019-2020, farmers’ participation in the e-procurement system has increased five-fold, from 465,000 to 2.36 million farmers.

Overall, West Bengal’s paddy procurement was 22 percent and 24 percent of total production in 2017-2018 and 2018-2019, respectively.

In Bangladesh, the government hardly buys 5 to 8 percent of total production and that again mostly from millers than the farmers.

In West Bengal, paddy is procured from farmers primarily through two approaches. 

Under the first approach, farmers bring paddy to centralized procurement centers (CPCs), or Kishan Mandis, and receive a Rs. 20 per quintal transport allowance (Tk 226.305 per MT). Officials assigned by the Food and Supplies Department purchase paddy from farmers and record these sales in the e-procurement system. Farmers’ payments are made via account payee checks under the ‘Dhan Din Cheque Nin’ program on the same day of receipt of paddy from farmers.

Under the second approach, registered farmers’ cooperatives, self-help groups (SHG), or producers’ organizations, which have applied, been screened, and are registered with the District Food and Civil Supply Department, announce the paddy procurement date in advance in the locality and procure paddy from registered farmers. The cooperatives then deliver the paddy to state government-designated custom milled rice (CMR) agencies, which have agreements with select rice mills. A designated government official certifies receipt of the paddy and sends the certificate of delivery to the CMR agency, and farmers receive an acknowledgement of sale on the back of the Farmers’ Registration Certificate to be issued by the respective CMR agency. Rice millers are provided a transport allowance of Rs. 18.38 per quintal (Tk 208.00 per MT) for delivering paddy from the CMR agency to the government-designated rice mill. Farmers’ cooperatives update the sales information on the e-procurement system and notify all registered members about sales via SMS. The state government pays farmers’ cooperatives, SHGs.

Can West Bengal’s model provide options for Bangladesh’s policy shift?

A strong political will and a small policy shift can actually make Bangladesh able to purchase the entire procurement quantity as paddy to benefit the farmers.

In the new method, farmers would bring their paddy to the local supply depot (LSD) to sell it to the Directorate General of Food (DGF).The government would fix a procurement price and set a lower limit of 200 kg and an upper limit to 2 tons of paddy per farmer for procurement to increase participation of smallholder farmers in the procurement system. Payment could be made to farmers using the existing paddy procurement system or e-payment system. 

The government-designated rice millers would transport the procured paddy from LSDs to rice mills and mill the rice as standard crushing ratio of 0.67 (that is, 67 tons of milled rice for every 100 tons of paddy). Rice millers would receive payment to cover the carrying cost for moving paddy from the LSD to mills and a milling charge.

If the government can ensure direct paddy purchase from the growers, crush the same into rice by offering a milling charge to the rice millers, it will be beneficial for all parties. Farmers will get their much-deserved price support, millers will get their service charges and the government will be able to maintain a good food reserve.