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Ominous signs as rice prices spiral

Jun 19 2017

June 17, 2017 ( by Abdur Rahim Harmachi, Faysal Atik and Tabarul Haque, ) 


The prices of rice are spiralling out of control as the blame game between wholesalers and millers continues and experts predict a ‘food crisis’ in the making.

Government data often lower than market prices shows a 47 percent rise in the price of coarse rice while a fine variety saw around 20 percent rise in a year.

Millions of low-income people in the country are worst-hit by the price shock. Coarse rice consumed by people with low income is now being sold at a minimum rate of Tk 46 per kg.

The fine variety is currently on sale at no less than Tk 60 per kg.

Last three months were the worst period when people saw a steep rise in prices of rice of almost all varieties.

An agro-economist sees it as an ominous sign of a food crisis ahead, reminiscent of price spirals during the army-backed caretaker government.

Prices of coarse and thin grains rose to Tk 40 per kg and Tk 56 per kg respectively in 2007 and 2008 during the caretaker government rule. It was then recorded as the highest price of rice since independence.

M Asaduzzaman, a professor and a fellow at the Bangladesh Institute of Development Studies or BIDS, says, "The prices had created panic at that time."
“I think we will face the same situation again.”

Boro paddy cultivation in the country was hit hard by unseasonal rains and flash floods earlier this year. On the other hand, rice production slumped in China, Vietnam and India. A 28 percent duty levied on imports is also blamed for the hike.
However, the market was significantly stable during Awami League’s 2009-2013 tenure when coarse rice was sold at Tk 30-35 and thin rice at Tk 40-42 per kg.

Bangladesh is considered a food self-sufficient country.
“A syndicate of millers and wholesalers has crafted the ‘crisis’ to sell rice at higher prices. The government seems reluctant in this regard,” said Asaduzzaman.

“I guess mill owners and wholesalers have an ample stock of rice. It is unfortunate that the government does not even have that data. The government is neither monitoring them nor compelling them to release the stock.”

When contacted, Food Minister Qamrul Islam declined to comment on rice prices and advised to consult the Directorate General of Food.

Badrul Hasan, director general of the directorate, said the price soared as production turned out to be low this year due to flash floods in 'haors' and adverse weather.

He hoped the rates would return to normal if the 28 percent duties charged on import are withdrawn.

Glimpses of markets

>> Coarse rice varieties -- Swarna and Paijam -- were on sale at Tk 48-50 per kg and other low-quality coarse rice at Tk 46 in kitchen markets in Sheorapara, Mohakhali, Rampura, Karwan Bazar, and Hatirpool. Traders retailed Miniket and Najirshail at Tk 56-62 a kg.

>> Babubazar-Moulvibazar in Old Dhaka, the country’s largest wholesale rice market, charges around Tk 4 less than retailers.

>> Wholesalers say they have no control over the rates.

>> A Kushtia-based miller, for example, sells a 50kg bag of coarse rice at Tk 1,950 (Tk 39 per kg) and Miniket rice at Tk 2,600 (Tk 52 per kg) to Dhaka. The rates have increased due to soaring prices of paddy, according to millers.

>> Each maund of paddy is sold at Tk 1,200 which yields around 27kg of rice. The production cost is recouped from sales of broken kernels and bran.

>> In this Boro harvest season, the government is buying paddy from farmers at Tk 24 per kg and rice at Tk 34.

Depleting stocks

The government had some 193,190 tonnes of rice in stock on June 12, compared to 593,020 tonnes on the same date last year, according to the Food Planning and Monitoring Unit or FPMU.

Quoting the Department of Agricultural Marketing, an FPMU report says the wholesale price and retail price of coarse rice in the capital is Tk 45-46.5 and Tk 46-48 per kg respectively.

Between May 2 and Jun 11, the government procured a total of 19,532 tonnes of Boro rice from farmers.

Blame game

Wholesalers claim the hike is nothing but the result of an artificial crisis created by a syndicate of millers.
Unlike in previous Boro procurement seasons, rice price has soared this year despite the presence of new rice in markets, said Md Selim, proprietor of Shubho Rice Agency in Babubazar.

Mill owners are using crop losses caused by flash floods as an excuse to increase the rates, he said.

Auto rice mills are now the main source of rice supply. These mills are concentrated in some districts: Kushtia, Sherpur, Chapainawabganj, Rajshahi, Bogra, and Naogaon.

“Some industrialists are controlling the rice market countrywide with these auto mills. And the government is failing to keep the rates normal,” said Abdul Jabbar, manager of Chowdhury Rice Agency in Babubazar.

He identified three areas of concern leading to the current crisis: paddy shortage, corrupt practices by millers and hoarding by unscrupulous businessmen.

Mirpur-based trader Wahiduzzaman said sales of rice jumped up to three times last month when people stocked up with grains fearing a hike in June.
“One customer who usually buys one sack of rice bought three. Mill owners took advantage of the situation. Now sales of rice have dropped in Dhaka,” said Wahid, owner of New Billal Rice Agency.

Mill owners, however, put the blame squarely on the shortage of paddy production caused by flash floods and inclement weather.

Tarek Anam, marketing executive of Rashid Automill, said they were selling a 50kg bag of Miniket rice at Tk 2,600 -- the highest on record.

“Rice prices should be higher if you consider paddy prices,” he said.

M Asaduzzaman of BIDS has suggested lowering tax on rice import to normalise the rice market.

If duties on rice import are cut down to 15 percent from 25 percent, costs will go down, so will the prices, he said.
Badrul Hasan, DG of Directorate General of Food, said: “The ministry was served with recommendations in May to lift the import tariff. The government may take steps in that direction.”

Bangladesh spends $440 to import one tonne of rice from India, and another Tk 9 is added as tariff per kg.

“We believe removal of the tariff will lower the cost and rice prices will come down once enough rice is imported from India,” said Hasan.