Acute shortage or fragile self-sufficiency?

I am writing this paper to allay the misapprehension that Bangladesh might confront an acute food crisis in the near future. The price hike and market volatility may have bred this fear in the mind of many sensible persons, let alone the not-too-informed laity. Reduction in global food stock and abnormal food shortage in some countries accentuated the phobia in people's minds. In Bangladesh, aman crop of 2007 was adversely affected by floods and Cyclone Sidr.
Food stock in government godowns was not enough to launch a massive public distribution program throughout the country. Our helplessness in ensuring timely procurement of only 2 to 5 hundred thousand (lac) tons of promised rice at reasonable price pushed us almost to a point of despondency. Some amongst us thought that only a deux ex machina could save us from such a difficult situation.
Bangladesh has not exported food grains for at least the last 50 years. I do not think it had ever done so. At the same time, it was not a terribly food deficit country since Pakistan days. As a province, former East Pakistan always imported wheat from West Pakistan and other countries because it was never self-sufficient in wheat. There were years of crop failure when the country had to import food grains in larger quantities, usually not exceeding 10 -15% of domestic production -- except the year following the devastating floods of 1999.
Food aid was a major source of external procurement. This dwindled over the years. The country had to make up for the insignificant shortfall through commercial import, the bulk of which comprised wheat. Rice import through food aid virtually dried up in the last one decade. Despite this unfavourable development there were years when Bangladesh did not import any significant quantity of rice through commercial channels.
Nonetheless, it always imported wheat, which had a very insignificant demand during pre- independence days because people of this province were averse to considering it as a substitute of rice, the only staple food at that time. The situation has changed. Wheat has gained such acceptance as an important food item, bakery input, and raw material for diversified production processes, that the country has to import about 2.5 million tons on average annually.
At the time of independence, total food production was around 10 million tons, with a population of 75 million. With a bumper boro harvest this season, food production is expected to reach 30 million tons, with a population of slightly less than 150 million. Production of food grain has increased three times, while population has increased two times. Simple arithmetic will say that per capita availability of food grains has increased substantially. Except 2001-02, boro production has increased to reach about 18 million tons this year. This is about four times the production in 1986-87. Aman production has also increased, except in the years following devastating floods.
Production of wheat showed an increasing trend up to 1998-99, when it hit a buffer. It then started declining and plummeted to 737 thousand tons from its peak of 1908 tons. It appears that we have not keenly monitored the production of wheat to arrest this slide. The demand for wheat import has increased; in the absence of favourable aid climate we had to meet the import gap by using foreign exchange.
BBS and FPMU figures, as quoted by Ruhhul Amin (Development Review, volume 18, 2006), show that while Bangladesh was slightly deficit in food grains in 1980-81 it turned out to be a rice surplus country in 1999-2000, and continued to be so up to 2004- 05. Import figures support this position. Import of wheat, however, showed an increasing trend over the last decade or so, keeping pace with the development trend. World rice production also maintained increasing trend, by and large from 1998 to 2005 when the figure reached 622 million tons. Production suffered in 2007. It, however, bounced back in 2008; the expected production is 666 million tons.
It is not clear why we should be so alarmed about food security in Bangladesh. In the absence of any devastating natural calamity, the country may well be considered self- sufficient in food. If natural calamity afflicts any food surplus country with an unprecedented impact, it will be rendered a wretched country with a yawning food deficit for a year or two, but it will revert to its original position when the effect of the calamity is over. God forbid, disaster can bludgeon any country. The problem of Bangladesh is that its self-sufficiency is on the fringe; it has as yet no cushion against external or internal shocks. Any slight mismanagement or alarm-mongering exacerbates the problem.
Increased production does not per se lead to a satisfactory marketable surplus. There is no one to one relation between these two variables. Mechanisms, along with income elasticity, play their role in determining the marketable surplus. Rice or paddy is not a perishable commodity, it has a reasonably long shelf life. As the economic position of farmers improves they hold more stock, both for higher consumption and for meeting contingencies.
With the obsolescence of native technology, the husking equipment, the millers have come to rule the market. Over the last few years, they have almost completely wrested the market power and manipulated both supply and price of rice in the market. The volume of procurement depends on their compliance to government enjoinment.
It is interesting to see that government's internal procurement of rice reached nearly one million tons in '80-'81, '89-'90 and '91-'92, when the production of food grains was far below its present level: 14.97 million tons in '80-'81 and 19.31million tons in '91-'92. It is intriguing to note that government is finding it extremely difficult to procure one million tons of rice when production of a single crop has jumped to about 18 million tons.
It appears that government's endeavour is dominated by the miller's market power. The game has become more important than the actual production. Unless the surplus farmers and millers are made to comply with their social obligations, the position may remain unaltered, much to the frustration of the government and the people in general.
A word about the price of rice may be relevant at this stage. Price is clearly distinct from the stock of rice. Stock is a real variable while price is a nominal variable. Price is determined by a complex interaction of a plethora of variables. Production is only one such variable. The most important variable in the determination of price is still the money supply. If supply of money outstrips the increased production, price hike will continue unabated. In Bangladesh, money supply has reached a staggering height in the last few years. This increase, coupled with income elasticity, has created a ratchet effect in the market.
The price of potato is also much higher compared to year before last, though the country harvested an unprecedented bumper production of potato this year. This has gone unnoticed because potato does not constitute the staple food in the country, and people have grown inured to high prices of such essential commodities in the recent past. We cannot expect that price of rice will drastically tumble down because the procurement price has been fixed at a sufficiently high level (Tk28/kg), such that the farmers are convincingly compensated; the price is about 25% higher than the cost of production.
The point being driven at is that we have nothing to be alarmed about the aggregate availability of food grains in the country. Food production has demonstrably outpaced population growth. Per capita availability of food grains has markedly increased. We have imported rice; this implies that there might be a discernible gap in the demand and production of rice. At the same time, we observe in the market place that grains produced last year have spilled over into the current year. This implies that last year's production has not been exhausted, as has been the case with potatoes for the last few years.
A bumper crop, and we do not have place for storage of the surplus potatoes. One may have good rationale to be optimistic about the future of rice stock as well. With concerted effort, it is well nigh possible for Bangladesh to generate a surplus rice stock for export. That will be a real boon given the international price situation: a commendable example of turning one's weakness into strength.
The real concern is that the country's Public Food Distribution System (PFDS) has been severely undermined in the last three decades. We had a highly developed public distribution system -- ration card system -- in this part of the world. That has been phased out with the declining food grain prices in the open market on the one hand and our commitment to free market economy on the other. It is time that a modified rationing system is reintroduced, at least for the priority target groups.
Identifying the target groups is not a difficult task in the Bangladesh context because the country happens to be an intensively surveyed area and income or asset-based target groups are already well identified. The ultra poor, the VGD-VGF groups, the elderly groups, the poor widows and abandoned women, the landless labourers, the fixed income employees in government, autonomous bodies, companies and industrial units, the unemployed family heads, and insolvent freedom fighters comprise the priority groups.
The screening of the groups has to be extremely fair. Around 25 hundred thousand (lac) tons of grains should suffice to carry out the program. It will be a big task, but not an unmanageable one, given our previous experience in the field. Instead of alarm mongering we should immediately get down to work and try to make the best out of the present situation, which is not as horrifying as is perceived by many.

Dr. Saadat Husain is Chairman, Public Service Commission.