Is the government failing to control high rice prices due to the food department’s indifference to building a buffer stock?
The state-run Trading Corporation of Bangladesh (TCB) reports an increase of up to Tk4 per kilogram of rice over the past week.
At the beginning of November, the inter-ministerial Food Planning and Monitoring Committee declared a plan to purchase 350,000 tons of paddy directly from farmers by mid-March as part of the government’s foodgrain procurement program. This initiative aimed to boost the government’s buffer stock of rice and provide farmers with a fair price.
Halfway through the program, the food department has managed to procure less than 10,000 tons of Aman paddy from farmers, reflecting a clear indifference to building the necessary buffer stock of this staple grain.
The government’s rice reserves have now dropped below the food security threshold of 1,000,000 tons. Efforts to import rice from abroad have met with limited success, forcing the Directorate General of Food to extend the import deadline twice—now giving private importers until mid-February to complete their consignments.
Interestingly, the office of the Directorate General of Food (DG Food) has continued to prioritize procuring rice from millers over buying paddy directly from farmers.
This preference is evident in the rice procurement statistics, which show that the government department favored millers, allowing them to exploit the situation. As of the end of last week, the DG Food had procured over a third of the planned 650,000 tons of rice from several thousand rice mill owners across Bangladesh but managed to purchase less than three percent of paddy directly from farmers.
Seeing the food officials’ indifference to buying paddy from farmers, millers initially withheld their agreed rice supplies to the government. This led to a drop in rice stocks in government silos and further increased retail market prices.
In late December, the DG Food issued a circular instructing district and sub-district officials to take action against noncompliant millers suspected of hoarding rice to profit from artificial price hikes.
This threat of action proved effective, as the government’s rice procurement volume doubled within two weeks—from the first 100,000 tons in November-December to over 200,000 tons by the second week of January.
IFPRI recommends govt to buy paddy from farmers
Farmers often express concerns that the government fails to provide adequate price support when paddy prices fall below production costs. In response to a request from the Ministry of Agriculture, the Washington-based food policy think tank, the International Food Policy Research Institute (IFPRI), conducted a study in 2019 to assess the effectiveness of the government's direct paddy procurement system in helping farmers cope with low harvest prices in the future.
In 2019, the Directorate General of Food, under the Ministry of Food, procured 1.42 million tons of rice, representing 7.2% of the 2018/19 Boro rice harvest. Of this amount, 81% was obtained from rice millers, while the remaining 19% was procured directly from farmers in the form of paddy.
The findings revealed that rice millers benefited the most from the procurement system. They purchased hybrid paddy from traders at prices 25% lower than those of high-yielding variety (HYV) paddy and sold milled rice to the government at Tk36 per kilogram. Although hybrid rice accounted for only 18% of total Boro production, it constituted 94% of the rice sold by millers to the government.
Among other recommendations, the IFPRI study suggested that the government procure paddy directly from farmers.
Although the Food Planning and Monitoring Committee (FPMC) took the IFPRI study into consideration, the government continues to primarily procure rice from millers.