Another failure in internal procurement of aman rice

The failure in internal procurement of aman may be attributed to the following factors:

First, according to Bangladesh Bureau of Statistics (BBS), in 2000-2001, 2001-2002, and 2002-2003 aman production stood at 112.49 lakh tons, 107.26 lakh tons, and 111.15 lakh tons, respectively. But preliminary estimate shows that aman production in 2005-2006 will not exceed 110 lakh tons against the target for 129.40 lakh tons.

Thus, even after four years, aman production in 2005-2006 will not reach the 2000-2001 production level. Aman production in 2004-2005 stood at 98 lakh tons only against the target for 127 lakh tons. Thus, the shortfall in aman production in the country was an important cause for the total failure in the government drive for procuring aman in 2004-2005 and 2005-2006.

Second, two main objectives play a dominant role in the government drive for procurement of aman and boro: (i) building up buffer stocks to meet future emergencies or shortages; and (ii) protecting the growers by offering fair prices, in particular during the harvesting period when the price of rice generally shows a downward trend in the market, so that they feel encouraged to produce more and contribute to national economy.

But the price situation during the aman harvesting period was just the reverse last year and this year. The price of aman (paddy and rice) during the harvesting period of last year and this year was higher in the market than the government administered price. While per quintal price of coarse rice in the wholesale market in January 2000-2001 and 2001-2002 was Tk 1,130 and 1,252 respectively, the minimum price of coarse rice in January 2004-2005 in the wholesale market was Tk 1,611 per quintal. According to the food ministry source, the per quintal price of coarse rice in the wholesale market in January this year was not below Tk 1,600 per quintal. The retail price of rice from market to market was understandably higher.

The price for internal procurement of aman this year was originally fixed at Tk 9.25 per kg for paddy and Tk 14 for rice. Even though the price of rice was subsequently raised to Tk 15 per kg, yet the government administered price remained below the market price. As a result, only around 44,000 tons of rice could be procured this year

Last but not the least, while the shortfall in production and higher price in the market in comparison with the price offered by the government were primarily responsible for the failure of internal procurement of aman, absence of adequate publicity about the drive is considered by many as an important cause for the failure.

In many cases, information about the drive, such as number of collection centres, prices fixed, duration of the procurement and target set were not properly announced in the print and electronic media by the concerned agencies. But this was the easiest task on the part of authorities to make public every step taken to procure food grains for the benefit of the sellers.

Now, let us see what led to the rise in the price of food grains (rice and wheat) in the country in recent years.

Negative growth
A visit to the food ministry website shows the domestic production of food grains between 2000-2001 and 2004-2005 as well as growth in population during the same period (see table).

It appears from the above that in 2000-2001 gross domestic food grain production reached 267. 58 lakh tons, the highest production since independence in 1971, and net quantity available for human consumption stood at 240.83 lakh tons (after deducting 10 percent for seed, feed, and wastage) for a population of 130 million.

Gross domestic food grain production in the next two years failed to reach the 2000-2001 production level. In 2003-2004, gross domestic food grain production exceeded the 2000-2001 level by only 6.84 lakh tons against a population growth of 5 million. In 2004-2005, the gross domestic food production declined to 261.33 lakh tons against a population growth of 7 million between 2000-2001 and 2004-2005.

Rise in production cost
High costs of fertilizers and occasional increases in the price of diesel required for operating irrigation pumps have increased the production costs of aman and boro and thereby become constraints to increased income of poor farming community. A column in The Daily Star on June 15, 2004 showed that "a farmer in Bangladesh procures fertilizer at $176 per ton compared to $107 in Indian Punjab, $126 in Andhra Pradesh, $165 in Thailand, and $170 in Vietnam. Likewise, the prices of irrigation are as follows: $51 per hectare in Bangladesh, $32 in Punjab, $18 in Thailand, and $26 in Vietnam." In addition to higher prices of fertilizer, there is often scarcity of fertilizer and diesel during the cultivation of boro. The present crisis of fertilizer and diesel is a case in point.

Inadequate subsidy
It is a fact that the government has in recent years adopted the policy to increase subsidy and assistance to agriculture sector. But the amount of subsidy and assistance is insufficient for the growth of this vital sector in general and for bringing down the cost of production of food grains in particular. Available information suggests that the farmers in Switzerland are now given 69 cents subsidy to produce crops worth one US dollar, in the US the amount is 45 cents, and in EU countries 35 cents.

Rise in transportation costs
The occasional increases in the domestic prices of fuel due to the rise in the prices of fuel in international market has led to the substantial increase in the inter-district and intra-district transportation cost of food grains.

Rise in prices
In recent years, there has been a sharp rise in the price of rice in the international markets. Available information reveals that in December 2004, the import price of Indian rice was (FOB) increased by 25 percent in comparison with the price of December 2003.The import price (FOB) of Thai rice in December 2004 also increased by about 30 percent over the price of December 2003. The increase in the import price of rice in the international markets, particularly in the Indian market, has affected rice import in the private sector. Available information reveals that the import price of Indian rice at the moment comes to a minimum of Tk 1,600 per quintal (kg Tk 16).

One of the three components of food security is availability of food, the other two being access to food and utilization of food. The sources of food availability are: (a) domestic production, (b) commercial imports, (c) food aid, and (d) building up security stocks by the government. In the eighties and early nineties, it was considered "critical" if government food security stocks at any time went below 9 lakh tons. In the late nineties, the government decided to maintain security stocks of food grain at a minimum of 10 lakh tons at all times. Though this decision reportedly remains in force till date, the security stocks of food grain in recent years mostly remained below the minimum level of 10 lakh tons. The present security stocks of food grain reportedly stands at 6.5 lakh tons, which is much below the minimum required level.

To conclude, food is a basic necessity of life. The 1996 World Food Summit in its Rome Declaration on World Food Security "reaffirmed the right of everyone to have access to safe and nutritious food, consistent with the right to adequate food and the fundamental right of everyone to be free from hunger."

Since domestic production is the primary source of our food security, the government must take all necessary steps for increasing the domestic production of food grains and other varieties of food. At the same time, the government should maintain sufficient security stocks of food grains for the public food distribution systems (PFDS) and for other emergencies.

M. Abdul Latif Mondal is a former Secretary to the government.