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Bids Research: Top 50 millers influence rice market

  • Published at 06:55 pm December 1st, 2019
Guests attend the inaugural session of a two-day Research Almanac 2019 organized by Bangladesh Institute of Development Studies at a Dhaka hotel on Sunday, December 1, 2019 Rajib Dhar/Dhaka Tribune

The government should strength monitoring over the top rice millers so that none can stockpile rice beyond the government-set time period and amount

Supply chain of rice market is mainly dominated by the millers, particularly 50 top millers are influencing the rice market, according to a research paper placed on the first day of a two-day seminar that began on Sunday. 

The government should strength monitoring over the top rice millers so that none can stockpile rice beyond the government-set time period and amount. 

The Bangladesh Institute of Development Studies (BIDS) organized the event titled Research Almanac 2019 to publish the findings of 15 researches done this year at a Dhaka city hotel. 

The research paper “Rice Market in Bangladesh: Role of Key intermediaries” was presented by BIDS senior research fellow Nazneen Ahmed. 

According to it, 50 top millers are controlling 19% rice market while there are 20,000 registered millers across the country. 

“According to data from Food and Agriculture Organization, 2017, Bangladesh is the fifth rice producing country in the world. Our productivity is better than India. Now the total supply of rice in our country is at 36 lakh tons including import,” she said while presenting the paper. 

"We do not know if there is any syndicate or not in the market but faria, aratdar, millers and commission agent play an important role in the rice market," she added. 

“The aratdars are really the central actors in the market playing the all important role of enabling stranger-transactions, creating trust, and in general, supporting credible contracts to be entered into and leading to repeat transactions. Millers are bridging between downstream of paddy and upstream of rice,” says the paper. 

Nazneen Ahmed suggested strengthening monitoring over the top rice millers, saying: “There are 20,000 rice millers in the country, of them 950 are auto rice millers. They are the big auto rice millers. Their daily production capacity is around at 200 tons. As per government stock law, the millers can stock the rice twice their production capacity and they can stock their rice for 15 days in the store.” 

She said there were many rice millers who had a larger store than their mills and it should not be allowed. 

As per the paper, top four millers' milling capacity is 11,648 tons and they are controlling three percent of the market; top eight millers' milling capacity is at 18,552 tons and they are controlling four percent the market; top 16 millers' milling capacity is at 32,465 tons and they are controlling eight percent of the market; top 32 millers' milling capacity is at 54,100 tons and they are controlling 13% of the rice market and top 50 millers' milling capacity is at 78,686 tons and they are controlling 19% of the rice market. 

Although there is strong belief among the market participants that millers influence the market price, the evidence is not absolutely concrete, it says, adding millers’ risk is higher and so is their expected return from the business. 

Since millers have a strong network and evidently long trading relationship with aratdars in the upstream and wholesalers in the downstream, they may temporarily slowdown the production process which may exert a spike in rice price, the paper points out. 

Boro and Aman varieties constitute 91% of rice production. The country’s share of rice import is less than 1-2% of the total supply. Rice is mainly imported from India, Myanmar and Thailand. 

Shamsul Alam, member of the General Economic Division (GED) under the Planning Commission, said: “There is a huge competition in the country’s rice market. Yearly rice production of our country is at 36 million tons including imports. The demand for rice is about 30 million tons. There is a surplus of 60 lakh tons. So I do not understand why there is a crisis.”

He claimed the same thing happened in the case of onion. "Who is responsible for this failure, businessmen or government? Data analysis is very important. We need to have the right information on our production and demand," Shamsul Alam said. 

As the chief guest, former finance minister Abul Maal Abdul Muhith said the economy of Bangladesh had similarities with India in several aspects, including dependence on neighboring countries.

"The government should analyze the situation of India and has to think why their (India) economy is experiencing a four percent growth," he said. 

"China's growth is also falling. Our economy might face the same situation," Muhith warned.

He put emphasis on taking proper measures instead of releasing data that show huge growth.

The former minister said the size of budget in Bangladesh was small compared to other countries. "The budget-GDP ratio and the revenue-GDP ratio are the lowest in the world, and the ratios are not rising despite several initiatives," he noted.

He lauded the government for spending more than two percent of the GDP for social safety net, which played a significant role in maintaining higher purchasing power, boosting aggregate demand and reducing poverty rate.

"Based on expenditure on social security, Bangladesh improved in many socio-economic indicators and became a role model for Pakistan, India and other neighboring countries," he said. 

Former finance minister M Syeduzzaman said lack of good governance and inefficiency in the banking sector would be a major challenge for the economic development in the near future.

He expressed annoyance over the low quality of education at all levels and emphasized more research in public and private universities.

Planning Secretary Nurul Amin recommended finding a way to meet the challenges of the economy after graduating from least developed country (LDCs).

KAS Murshid, Director General of the BIDS, chaired the inaugural session.