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Rice export a poor proposition

  • Published at 12:41 am June 3rd, 2019
The government hopes once the export line opens, it will help buoy up the market, dampened mostly because of the ongoing rice glut Syed Zakir Hossain/Dhaka Tribune

Export subsidy will only benefit the traders, not farmers, experts fear

The price subsidy that the traders will get for exporting rice will cost government something in the range of Tk600 crore to Tk1,200 crore.

Experts fear, it will not serve the purpose as it would only benefit the traders, not the paddy growers who have been suffering due to low paddy prices in the current Boro season.

They rather ask government to utilize more funds on paddy purchase directly from the farmers. 

The government announced last week to provide up to 30% export subsidy for private traders who will be exporting rice abroad.

Government is hoping that once the export line opens it will help buoy up the market, dampened mostly because of rice glut due to carryover stocks from previous cheaper imports and high domestic output in two successive rice seasons — Aman and Boro.      

  • Rice exports subsidy will cost govt between Tk600cr and Tk1,200cr
  • Paddy price drops as low as Tk499 a maund, says IFPRI
  • Govt paddy procurement amount too low to have impact

Agriculture Minister Dr Abdur Razzaque last Thursday declared the government’s readiness to allow up to 1.5 million tons of rice export.

Given the current poor demand of rice in international market, a rough estimate says the government would have to bear something between Tk600 crore to Tk1,200 crore as export subsidy, even if the millers and traders having big rice stocks manage to find export markets for 1.5 million tons of rice.

To Dr Akhter Ahmed, who heads the Washington-based International Food Policy Research Institute’s (IFPRI) Bangladesh operation, rice export is a poor proposition as it will only benefit the traders, not the farmers.

“Rather, I’ll propose the government invest this money on buying paddy directly from farmers, convert the paddy to rice through millers and then preserve in public granaries,” says Akhter, also the chief of party of the USAID-supported Policy Research and Strategy Support Program.

Anwar Faruque, a former secretary of the Agriculture Ministry, also considers that government needed to inject more money on paddy procurement if it likes to mitigate the woes of Boro farmers during this season of Eid festival.

He said, instead of procuring paddy following faulty farmers’ list, the government should buy from farmers’ cooperatives as is the case in India’s West Bengal.

‘Subsidy to hike rice price’

Market sources told Dhaka Tribune the traders, who got benefitted by importing cheaper rice from across the border taking the government’s zero tariff advantage in 2017 and 2018, would benefit again by getting the export subsidy.

After a government-declared one million tons of crop loss in 2017 haor floods, it allowed both public and private sector rice imports at zero tariff, thereby, flooding the domestic market with a record four million tons of import.

Akhter Ahmed fears export of rice with price subsidy facility would rather result in high domestic rice prices; and will not help farmers getting fair price for their paddy.

“Now farmers are suffering from low paddy price and then (in case of rice export) the consumers will also suffer due to price hike of the staple in the domestic market,” he said.

As against the government’s paddy procurement price of Tk1,040 a maund, farmers across the country are faring poorly by getting only Tk500 to Tk600 price offer from the traders and millers.

As government plans to buy only 0.15 million tons of paddy from farmers and 1.1 million tons rice only from the millers, the fair price set by the government is having no impact in the market in this Boro season when farmers are expected to have grown nearly 20 million tons of rice.

Moreover, the government took the rice export decision at a time when global demand for rice is fast shrinking with main players in the rice export markets India, Thailand and Vietnam getting nearly no fresh orders.

In a presentation held at the Agriculture Ministry on May 20, Akhter Ahmed informed the government that paddy price declined to as low as Tk499 on May 19. “Paddy price might further collapse once Boro harvest is completed,” he feared.

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“The main objective of procurement should be to support prices for farm-level incentives. It is counterproductive to include other objectives, such as public stocks and distributional considerations such as safety net or disaster relief...

“However, at the operational level of the Food Department, building up foodgrain stocks is perceived to be the dominant purpose,” the presentation stated.

It also suggested: “Rice procurement prices should be set and notified to farmers before rice planting season to enable farmers to make better land allocation decisions.”