'This year’s Boro harvest has not been a pleasant experience for farmers due to unexpected low prices against a higher cost of production and lack of buyers'
The Centre for Policy Dialogue (CPD) has recommended a cash incentive of Tk5,000 this year for every farmer who suffered losses due to low paddy prices.
The local think tank made the recommendation unveiling its report: “State of Bangladesh Economy and the Budget Challenges” at Cirdap auditorium in Dhaka yesterday.
“Injustice has been done to farmers with paddy prices as the government did not set the procurement target and prices in time. If the low price of paddy continues, it will be tough for farmers to survive. These armers deserve financial incentives, which is also financially logical,” said Debapriya Bhattacharya, a distinguished fellow of the CPD.
In the upcoming budget, apparel exporters demanded a 5% cash incentive against exports, which would cost about Tk15,000 crore, he said, arguing that spending Tk9,000 crore for farmers would not be illogical.
Toufiqul Islam Khan, a senior CPD research fellow said in his keynote presentation: “This year’s Boro harvest has not been a pleasant experience for farmers due to unexpected low prices against a higher cost of production and lack of buyers."
In the given situation the government should consider providing a cash incentive of Tk5,000 this year to each of the 1.82 crore farmers (agricultural input assistance card holders) in the absence of crop insurance against losses farmers incurred from Boro rice cultivation, said Toufiqul.
“Providing cash support may require a budgetary allocation of around Tk9,100 crore and it should be given to the farmers through the bank accounts of the respective farmers,” he suggested.
Budgetary support should be extended for the development of local manufacturers of machinery, such as low-cost credit facilities, reduction of VAT and import duties, and allocations for research and innovation of mechanization, he stated.
The CPD urged the government to reduce the production cost of rice, particularly labour cost, by raising both yields and mechanization.
The monitoring authorities should be more vigilant about the quantity of rice imported throughout FY18 and its impact on the domestic market, said Toufiqul.
Low import duties on rice should be rationalized to curb the import of rice by the private sector, he added.
Since the floods of 2017, fiscal measures for the private import of rice have adversely affected the rice market. Import duty on rice was reduced by 18% in June 2017, and it continued till May 2019, which he said should have been withdrawn much earlier.
As a result, about 3.5 million tons of rice was imported in FY18, mostly by the private sector, when the seasonal deficit of Boro production was estimated to be about 1.5 million tons in 2017.
The think-tank also suggested restructuring the government procurement system and the amount of procurement.
Considering the current stock of 1.45 million tons of food grains, there is further scope for procuring paddy using space available in different regions and the government should revisit the procurement target of paddy, which is currently set at 150,000 tons, said CPD.
The government should allocate additional funds for the procurement of extra paddy, it said, adding that in view of the poor procurement, a special drive was badly required.
A special targeted program could be designed for the poor and deprived (cyclone-affected people, fishermen, Rohingya people etc), CPD suggested.
In addition, the government may consider allowing the export of specific varieties of rice for a limited time, it said.
According to the forecast for 2019, about 47.3 million tons of rice will be exported by Asian countries, led by five main rice-exporting countries — India, Thailand, Vietnam, Pakistan, and China.
Government procurement is primarily rice-centric, which is usually over 90%, while paddy constitutes only a marginal share of total public stock. Both in 2016 and 2017, paddy procurement was 700,000 tons.
In contrast, for FY19, the target for paddy procurement was set at 150,000 tons only, against 1.15 million tons for rice procurement.
Given the early negative signals of retail prices, setting a negligible target for procurement of paddy was indeed a failure of the procurement committee, the CPD said.