All-out effort to tame rice prices
Historically, rice prices have never been this high -- this is too big a blow for the low-income people.
The government yesterday slashed the import duty on rice and is also working to import about 12 lakh tonnes of food grain including rice as it looks to rein in the price of the staple amid a cost of living crisis.
As on August 24, the government's food stock stood at 19.14 lakh tonnes, which is the highest in recent times and much above the safe benchmark of 12 lakh tonnes, according to data from the food ministry.
Of the food stock, 17.69 tonnes are rice.
And yet, the government is scrambling to shore up its rice reserves as it expects a lean Aman harvest for droughts in large parts of the country. Last fiscal year, Aman accounted for 39 percent of the total rice output of about 3.76 crore tonnes.
Farmers typically start transplanting Aman crops from the middle of July for harvesting towards the end of the year. But this year, vast parts of the agricultural lands, particularly up north, are dry, affecting the transplantation of Aman seedlings.
"We are predicting Aman production would be lower, so we have taken a precautionary measure to import rice to keep the market stable," said a food ministry official on the condition of anonymity.
Alongside its own imports, the government in June allowed private firms to import rice. But the response has been lukewarm due to high import duty.
As of August 24, the private sector players imported 74,000 tonnes of rice against the target of 10 lakh tonnes.
Subsequently, the National Board of Revenue yesterday slashed the regulatory duty on rice imports by 20 percentage points to 5 percent.
This has brought down the total tax incidence on rice imports to 15.25 percent from upwards of 25 percent previously.
"It is a good and necessary move -- I support both the import of rice and cut in import duty," said Quazi Shahabuddin, an agriculture economist.
The Aman crop will be affected for a number of reasons including the recent price hike of diesel, which is essential for irrigation of rice crops.
"Even if it is not a major crop, Aman is still important -- the government must be prepared to increase the food stock," said Shahabuddin, a former director general of the Bangladesh Institute of Development Studies.
Other than the anticipated lower Aman output, the government has another reason to procure food grains including rice: doubling the open market sales and the family card programme to give relief to the poor and the low-income people from the price spiral.
In July, which is the most recent available data, inflation stood at 7.48 percent, well above the budgetary target of 5.6 percent, according to the Bangladesh Bureau of Statistics. And food inflation was 8.19 percent.
"Historically, rice prices have never been this high -- this is too big a blow for the low-income people," Shahabuddin said.
Coarse rice, which is mostly consumed by the poor and the low-income people, is now selling for Tk 55-58 a kg, up from Tk 48-50 a month earlier, according to data from the Trading Corporation of Bangladesh.
Fine rice costs Tk 65-80 a kg, up from Tk 64-75 a month earlier.
The government had a plan to import a total of 7 lakh tonnes of food grain this fiscal year, 2 lakh of which would be rice and the rest wheat. That plan has been revised upwards to 12 lakh tonnes.
The food ministry already opened a tender on August 22 to purchase one lakh tonnes of food grain, including 50,000 tonnes of rice.
Work is on way to import 2.30 lakh tonnes of rice from Vietnam on a government-to-government basis, while plans are being made to import from Myanmar and India as well, said a food ministry official.
Alongside, the government is all set to import 5 lakh tonnes of wheat from Russia in a G2G deal. The shipment will take place in phases by January and the bill will be paid in US dollars, he added.
"It takes about 1-2 months to import and most of the major rice producing countries are also major consumers, so the import market for Bangladesh is slim pickings. It is good that the government has started the preparations in advance," Shahabuddin said.