Taking a gamble with food procurement

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Shamsul Huq Zahid
In a clear deviation from a built-in and old practice, the government last Monday decided not to procure rice from domestic market during the ongoing Aman season. The decision, taken a meeting of the Food Policy and Monitoring Committee (FPMC), has given rise to both surprises and worries.
Food and Disaster Management Minister Abdur Razzak has defended the decision saying that the rice prices in the domestic market are already high and the same might go even higher if the government starts procuring rice. He also unveiled the government plan to beef up its food stock to a comfortable level through imports from international market.
Actually, the government is taking a gamble by deciding against the procurement of rice from the domestic market. The outcome may go either way; the food prices might go up even further hurting millions of poor consumers or help stabilize the food prices at the current level.
At least, two factors might have prompted the government to take an unusual decision. The first one is the failure of the food ministry to procure even a half of the targeted quantity of rice during the last Boro season because of the gross mismatch between the open market and the official procurement prices. And the second one is the government's reluctance to fix the domestic procurement price at a level that is attractive to local sellers but more expensive than imported rice.
In the absence of official procurement drive, the private sector traders being the only players in the market might force the farmers sell their newly harvested Aman rice at relatively lower costs for a brief period. Though the food minister has assured the newsmen of the government intervention into the domestic food grain market in the event of such a development, in all likelihood, it could prove late because of procedural complexities. It is also unlikely that the consumers would get any kind of price relief because of lower procurement costs of the private sector traders.
The prices of cereals are already high in international market because of the supply crunch of the same. The Food and Agricultural Organisation (FAO) has warned that the prices could go up further because of short supply of food grains and reach their 2008 levels. So, domestic prices would continue to be influenced by the volatile global food market.
The cost of rice to be imported by the government is also high-between Tk 33 and Tk.35 a kg, according to the food minister.
What if the government had fixed the domestic procurement prices of Aman rice equivalent or near to that of imported rice? It could have, at least, provided some price support to the growers and helped the government save a good amount of foreign exchange.
The reasons cited in favour of the decision taken by the FPMC against domestic procurement of rice are also not tenable. The Committee, according to the food minister, took the decision taking into consideration the existing government food stock of 0.8 million tonnes and the equivalent quantity in the import pipeline. But the fact remains that the government even with better buffer food stocks did not do away with procurement programmes in the past.
It is almost certain that food grain prices would maintain high levels in the coming months and the current level of market intervention on the part of the government is unlikely to provide any relief to the consumers. The government has tried to bring down food prices through open market sale of rice in cities, towns and remote small urban centres but to no effect. Even a good harvest during the last Boro season failed to push the food prices down.
With international supply of rice and wheat remaining tight, the food minister's assurance relating to the import of another 8.0 million tonnes of food grains within the current calendar year is rather heartening. But a large reserve of official food stock would not mean anything to poor consumers if the prices of food grains continue to be high with all their ramifications.
The scope for making available the food grains to the poor, who constitute more than 40 per cent of the population, at prices lower than that prevailing in the market remains very limited, in terms of both physical and monetary capacities of the government. So, the situation on the food front in the short-term is likely to remain volatile.
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