Part III
B. Product-specific Issues

(i) Rice. Concerned government agencies (BBS, DAE and SPARSO) should jointly come up with an approximately correct estimate about Boro production in FY07.

Based on the estimated production level, government has to decide how much to procure through the on-going rice procurement program, and whether the government should make any commercial import and, if so, to what extent.

If the estimates show that Boro production in FY07 was higher than last year then the government has to procure more rice so that there was no sudden dip in the price and farmers are not negatively affected. On the other hand, if Boro production was less then last year and there was no significant reduction in the rice price at the farm level then government should put emphasis on public commercial import.

To make sure that lower income people are less affected by high price of rice, the government need to continue Open Market Sales (OMS) by BDR, Directorate of Food, and the TCB. Government should also make sure that targeted distribution of food grains under VGD, VGF, food for works programme are implemented properly.

(ii) Wheat flour. Considering the production possibilities and import situation, the government may go for commercial import of wheat and also explore the possibility of increased food aid (wheat) by the donor countries. If the government is able to get more food aid (wheat) it will have more ability to ensure food security of marginalized people through food for works programme, VGD, VGF and other safety net programmes.

The government must need to encourage importers to import more wheat by reducing the tariff rate (which has already been done) and reduction of L/C margin for wheat import. Considering high reserve of foreign currency lowering of L/C margin may not have any negative impact on foreign exchange availability.

(iii) Lentil. Due to global production loss and increase in international price, an acute supply shortage of lentil has been predicted in the first quarter of FY2007-08. Government should consider providing zero tariff facilities for import of lentil. TCB should also import lentil and initiate OMS to stabilize the market during the predicted supply shortage. BDR should continue selling of lentil through its Fair Price Shops.

From medium-term perspective, the government should promote pulse production in the country (chick pea in the Barind region, lentils through out the country) by delivering high quality seed at a subsidized rate.

(iv) Potato. The government may take initiatives to increase potato production by encouraging the availability and use of potato seeds which will reduce the demand for potato as seed (which is substantial).

The governments need to encourage establishment of more clod storages in the major production zones (e.g. Bikrampur, Munsiganj, Bogra, Comilla), both by the public and private sector, by providing incentives such as tax-holiday, tax exemption for investments in large scale cold storage facilities that are suitable for potato and vegetable storage.

(v) Edible Oil. The government needs to encourage production of oilseeds and reduce import duty (tariffs and para-tariffs) for oilseeds and crude oil.

(vi) Onion. The harvesting season of domestically produced onion is already on; price of onion was expected to come down with increase in the supply of local onion. Appropriate measures should be taken to preserve the excess supply for future, particularly for the month of Ramadan, after ensuring sufficient supply to meet the current demand. Import of onion needs to be encouraged.

(vii) Full cream milk powder. In the absence of concrete information, “no action” would possibly be the best action. It is because availability may not be a serious problem here; domestic producers of milk may be protected through continuation of current import policy which was likely to have positive impact in the coming years. However, this may not be considered as an essential item in Bangladesh.

(viii) Vegetables. Open Markets managed by BDR has reduced retail price of vegetables in these markets without any negative impact on farmers, BDR should continue operating these open markets.

Both public and private sector entrepreneurs need to increase processing and storage facilities, especially during the harvesting season.

More arats or distribution centres, may be established in the urban areas, both through public and private initiatives. For example, for the Dhaka city, new arats for vegetables could be established in Tongi or Mirpur areas to reduce the current dependence on existing arats. Participation of more new players at this stage will also enhance competition among agents which was likely to positively impact on prices.

Following the Indian example, terminal markets for perishable products e.g. vegetables and fruits should be established. This will operate on a 'hub-and-spoke' format with a view to maintain a link with the primary collection centres (the spokes) conveniently located at the production zone with the terminal markets (the hub).

The GoB should review cash incentive program for vegetable export which is currently 20 per cent of the CIF value. Due to the supply shortage of vegetables in domestic market, this cash incentive programme should be reviewed and current rate of 20 per cent should not be increased.

The government needs to encourage vegetable production by providing subsidy for breeder's seed production.

(ix) Egg. Encourage poultry feed production by supporting better use of shrimp heads, increase of maize production. The government needs to provide better technical assistance to prevent contamination of bird flu. Though the GoB has already taken several measures, the problem, unfortunately continues to persist. Therefore, the GoB needs to further strengthen these measures. The concerned agencies could also consult foreign experts in this regard which they have started to do.

(Concluded)