Potato glut and bailout plan

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Shahiduzzaman Khan
This year the government's popular slogan, 'Eat more potato and put less pressure on rice' has come to limelight again. The incumbent Agriculture Secretary of the government, chairing an all-important meeting of the Potato Advisory Board this week, called upon the people to change food habit and eat more potato to 'raise the demand of the low carbohydrate food'.
In support of his claim, the secretary cited new discovery of the scientists that proves potato contains 80 per cent lower carbohydrate than the country's main staple food -- rice. He also refuted the common notion that potato is harmful to diabetics.
If the scientists' finding is based on facts, then the country's general masses, including the diabetics, should have ample reasons to rejoice. They should be interested to eat more potato as the price of the food item is very low now. A kilogram (kg) of potato sells at Tk 8.0-10 in the retail markets as compared to last season's price of Tk 24-30 throughout the country, much to the relief of the consumers. The price is abnormally low in the wholesale markets.
Although consumers are happy, growers at the grassroots level are not. Due to extremely low price of the item, they are not getting even their production cost. In order to save the farmers from widespread losses, the advisory board recommended that a portion of the harvest should be exported immediately and storage capacity in the cold storages, be enhanced. A study found that speedy export of a consignment might save over 20,000 tonnes of potato from damage, as there is no space available in the country's cold storages. The Potato Advisory Board suggested that the government should help farmers erect bamboo shelves at some convenient places to store surplus potato for the next three months of the dry season. This can, however, be a temporary arrangement.
Indeed, potato glut has sent thousands of farmers across the country in the red this season, and as a consequent, they are compelled to either sell their produce at throwaway prices or pile it up in the field or on roadside, exposing it to sun and rain. Primary official estimates show this year's net potato output is over eight million tonnes. But cold storage owners say the output reached a new record of 10 million tonnes, and only a quarter of this could be accommodated in the cold storages.
Growers, who have failed to gets slots in cold storages and do not have their own storage mechanisms, are counting losses of Tk 100 a maund as potato is now selling at around Tk 350 a maund while its minimum production cost is about Tk 450 a maund. The potato glut compounded with space constraints and high rent of cold storages compelled many growers to sell their produce at low prices and stock the surplus in the open.
Cold storage owners held the government responsible for further worsening the situation by allowing potato import from India late last year. But the government justified allowing import saying it was done to offset the high local price at that time -- Tk 24-30 per kg. There was also a potato glut in fiscal 2007-08 with an output of 9.2 million tonnes. Its price came down substantially then. But potato production dropped to 6.7 million tonnes next year (2008-09), pushing up its price again.
Sensing growing demand for potato starch in international market, local entrepreneurs have now started setting up 100 per cent export-oriented factory of potato starch in a bid to diversify international trade. Potato starch, which has a lot of potentials in country's trade, is being used as raw materials in textile, pharmaceutical and paper industry. Though country's climate is favourable for potato cultivation, Bangladesh has to import about 6,000 tonnes of potato starch every year to meet the local industry's demand as raw materials. Already buyers from Australia, New Zealand, Europe, Japan and European countries have contacted local entrepreneurs to buy potato starch as the production of potato has been increasing every year.
Market analysts say higher bank interest rates between 10 and 12 per cent and lack of diversified use are major roadblocks to creating a viable market for potato in the country. The industry people also blame the government for its poor support for potato-based industry and exports. The country's around 350 cold storages have a capacity of preserving 2.5 million tonnes, whereas in ideal situation the storage capacity should not have been more than 1.5 to 1.6 million tonnes. As per international practices, one-third of the total output of a perishable product should be preserved for meeting off-season market demand.
Last year, farmers at the grassroots level claimed that due to unfavourable weather and high cost of seeds, fertiliser and insecticide, potato production had declined but the production cost had gone up substantially. Government sources, however, did not agree to such a contention saying that there was a bumper potato production last season and that there was no reason to believe that the production cost should be so high as compared to other commodities.
This is a general trend that demand and supply influence market mechanism. Price fixation by the ministers and advisers does not work. There were several futile attempts in the past to control market through fixing prices. Unfortunately, a day after fixation of the prices, the commodities in question become dearer. The nexus formed by the market intermediaries is hard to break. As such, a kind of mechanism should be developed to keep the prices of the essential commodities, including potato, stable at the retail markets, protecting interests of the farmers at the grassroots level.
szkhan@dhaka.net