RICE is the staple food in Bangladesh. Rice cultivation is crucial for our food security and economic survival of the farmers. Therefore, production, stock, supply and price fixing of paddy or rice are of serious concern for our farmers, as well as for the government. If the production of the paddy decreases, it would mean shortage of stock leading to import of rice, price hike and the suffering of common people. If excess rice is imported despite having sufficient production of paddy, the farmers of the country bear the loss as it destablises the local market. Considering the demand of rice and the production of paddy, the import quantity needs to be determined to make a balance between economic loss and crisis management.
In terms of paddy production, Bangladesh is presently holding the third position in the world and produces 36 million tonnes of paddies annually. However, farmers are not getting the fair price for their harvest. In 2003, the price of rice per kilogram was Tk 10.44 and its sales price was Tk 8.40. In 2011, the production cost of per mound paddy was Tk 560 but in the market sales price per mound was Tk 500–600. Similarly, in 2020, the production cost of per mound paddy was Tk 800 but sales price was Tk 600–700 per mound. It is evident that farmers have been historically deprived from fair price for their harvest. On analysing the total production to harvest cycle of May 2020, it may be observed that total cost incurred to cultivate paddy in one bigha land was Tk 15, 844 and on average 20 mounds of paddy was produced in per bigha land.
In what follows, cost of production of per mound paddy is Tk 792. Sadly, farmers had to sell per mound paddy at Tk 600 in the market which resulted into loss of Tk 192 per mound and Tk 5.15 a kilogram of paddy. After purchasing the paddy from the market, the mill owners spent Tk 80 for husking the paddy into rice. One mound paddy produces 26 kilograms of rice. Accordingly, the production cost of per kilogram of rice was Tk 26. The mill owners sold per kilogram of rice to the retailers at Tk 36. Thus, the profit margin of the mill owners was Tk 10 per kilogram. The retailers sold per kilogram of rice to the consumers at Tk 40. So, the profit of the retailers was Tk 4 per kilogram. In accordance with this calculation, it appears that the middlemen ie, mill owners and retailers, they all make profit except for the farmers.
Now the question is why the farmers have to incur loss. The reasons behind incurring such loss are many. Firstly, the farmers bear the cost of production like such as land preparation cost, seed, fertiliser, pesticide, irrigation and harvesting, but they do so by taking loans from the money lenders or NGOs or on credits from the product suppliers. Farmers are to pay all the outstanding bills or repay the loan immediately after harvesting the crops. Soon after harvesting of the crops, they remain under pressure to sell the paddy in the market and it makes impacts their burgeoning power and brings down the sale price of the paddy. Secondly, the presence of middlemen and the business syndicate are the other reasons for the farmers to get lower price of their harvest. The middlemen create syndicate and fix the purchase price of paddy and their syndicate is so powerful that the poor farmers cannot negotiate with them.
As a result, they are compelled to sell their paddy at the price fixed by the middlemen. Finally, the unplanned import of rice from abroad also gravely impacts the domestic rice market in Bangladesh. This practice has been going on in our country since long. For example, in 2003, the total demand of rice in the country was 21.8 million tonnes and the production of rice was 21.2 million tonnes. Therefore, the demand and supply gap was only six lakh tonnes. However, the total import in 2003 was 32 lakh tonnes. Generally, the import of rice has not been in congruence with the demand and the production gap. Due to excessive import of rice, the demand of paddy of the farmers is declined and the farmers fail to get their fair price. In the paddy/rice market, there are three sellers — farmers, middlemen and importers. Middlemen and importers are organised. They face any challenges combinedly. However, the farmers do not have any organisation and they are not independently capable enough to compete with the middlemen and the importers. They negotiate the price of rice in an unequal footing and incur loss.
Not only are the farmers deprived of fair price, they also do not have equitable access to agricultural loan. During the year when the rate of interest on deposit is reduced, the inflow of deposit in the bank is also decreased. Due to such downward inflow of deposit, the growth of disbursement of loan is reduced. In the July–September quarter of the year 2018, the growth of total loan disbursement was to some extent less although there was positive growth compared with the previous quarter, but the disbursement of agricultural loan was reduced by 17 per cent instead of its positive growth.
Farmers of the country are working hard to ensure supply of staple food and to protect the government from sudden food crisis. It is the responsibility of the government to protect the interest of the people of the agricultural sector. Every year, the government procures paddy from the market. In most of the cases, farmers do not get the opportunity to sell their products directly to the government representatives due to the influence of the middlemen. To ensure the due interest of the farmers, the government should increase the volume of procurement of paddy directly from the farmers. Instead of procuring rice from the mill owners, the government may procure paddy directly from the farmers and may get it husked into rice by the mill owners on payment. The government may instruct institutions such as military, police, public hospitals, public universities and jail authorities, all who need a bulk amount of rice to procure paddy directly from the farmers. The government may instruct all the state owned banks to provide sufficient loans to the farmers so that they may be able to store their crops and sell when there is adequate demand.
Md Shahadat Hossain is the former vice-president of the Institute of Chartered Accountants of Bangladesh and senior partner at MABS & J Partners.
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