Remove the middlemen
THE government has fixed the price of boro to be purchased by it this year. Effective from May, it will be Tk.14 per kg for paddy and Tk.22 per kg for rice. The procurement target has been set at 1.2 million tons in terms of rice.
Fixation of prices for procurement of domestic food grain by the government has always been a difficult task. "The price of rice is too high" is the complaint of the consumers. They would like the price of rice to be lower. "Rice price is too low" is the outcry of the farmers. They would like their rice price to be higher to provide them greater return for their effort and investment.
Why does the government go for domestic procurement of rice? It is mainly to provide price incentives to the growers by arresting the fall of prices during the harvesting seasons, and to build up government food security stocks in order to implement the targeted programs for food grain distribution under public food distribution system (PFDS).
The government financed food programs can be classified into three major groups. The first group includes Food For Work (FFW), Test Relief (TR), and Gratuitous Relief (GR), and is designed with the dual objectives of development and relief, the second one is grain price stabilisation program (OMS), and the third is for supplies for the priority groups in emergency jobs.
Recent newspaper reports suggest that farmers, economists and experts have expressed mixed reactions to the government procurement price of boro. Farmers, particularly the small and marginal farmers, tilling leased lands, are unhappy with the government procurement rate(s). They say that they will not make any profit as the production cost is high.
While some economists and experts hold the view that the government procurement price will benefit the farmers by arresting the further fall of rice price in the market as well as serve the interest of the consumers, others feel that the government procurement drive will hardly benefit the farmers in the absence of a proper procurement mechanism. This is because the government buys rice from the rice-millers and not from the growers, which is a big weakness in the procurement system. Rice-millers, who enter into contracts with the food directorate to supply rice, reap the benefit instead of the growers.
They also say that the boro procurement drive may not arrest the falling price of rice in the local market in view of the fact that the government targeted amount of procurement is not more than seven percent of the projected output of more than 17 million tons. As a result, the farmers will lose interest in growing rice in the future because of low price prices and little profit. The consequence may well be "fatal" as the country will have to increase its dependence on imported rice.
What influences the fixation of prices of domestic food grain procured by the government? The factor that mostly influences the fixation of prices of such food grain is the cost of production. In the year 2001-2002, when the author was the secretary of the food ministry, the procurement prices of boro paddy and rice were Tk.8.40 and Tk.13.25 per kg respectively. The production costs of paddy and rice were calculated at Tk.6.65 and Tk.10.23 per kg respectively.The rising cost of production during the last six years has led to an increase in the procurement prices of boro paddy and rice this season by 66 percent compared to the prices of 2001-2002. The other factors that also influence the fixation of prices are domestic production, stock position of food grain in the government godowns, international prices of food grain, import of food grain by the private sector, food aid, etc.
To conclude, the prices for government purchase of boro from domestic production this year seem to be reasonable. There is, however, the need for devising the procurement mechanism in such a way that the growers, not the middleman or the rice-millers, are benefitted most from the government procurement drive. The farmers would have remained satisfied even with lower prices if per acre yield of was higher.
Available information suggests that Bangladesh has got the lowest productivity among the world's rice producing countries. She can produce a maximum of 0.7 tons of paddy (not rice) per ace, against the global average of two tons per acre. The interests of the farmers and the nation can be protected by substantially increasing the per acre yield of food grain, particularly rice which meets more than 90 percent of the country's total cereal intake and more than 70 percent of calorie intake. Here the government has to play the major role.
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