Coming down to earth with a bump
Saturday, 25 April 2009
Mahmudur Rahman
Simplification is an art that has its dangers unless properly practiced. In management parlance complex issues are required to be broken down into manageable components in order for all areas to be covered and addressed. The word "manageable" is a key element in that unless the components are within grasp we are in a puzzle that has a crucial part missing.
So when there was the outcry of bringing prices of essentials down, the 'manageable' part of the supply chain namely the cost of production appears to have escaped the attention of most, a notable exception being the Agriculture Minister. She was the first to publicly state that the cost of crop inputs needs to reduce in order for farmers to get a profit on their produce. In other words, lower prices to consumers must take into consideration the cost of production plus a reasonable profit to farmers. And while this applies essentially to the staple grain rice, it is a theory equally valid for other crops including vegetables. In between there is also the issue of the infamous middle-man who hikes up the cost to make a tidy profit without breaking a sweat.
Reality is now sinking in. The Boro crop is coming through at bumper levels mainly because the farmers, who got a good price at the expense of the end-consumer, found it a profitable concern. Now that prices of rice are in the Tk 16-18 kg range at the bottom end, they are worried whether their cost of production, high due to the cost of inputs, will actually deliver them any profits at all. The resilient farmer will complain quietly and then take plan on planting a crop that gives better returns next year. Having taken a hit from potato and wheat, his choice is becoming sorely limited. Tomorrow may be another day but it is unlikely to be a happy one if this, as media reports suggest, is the case.
To a measure some of the election hype may have overdone the "pledges". There lies the issue of "manageable" component. The general public has to be made aware of the supply chain issues and that given international prices and recession crop input costs can only be managed to a certain degree. The upshot is that prices need to be reasonable and that applies to high prices and low prices. Agriculture subsidies are in all probability very much under the government scanner but total control of pricing is not within the remit in a free-market economy. One option could be a semi-free situation for core items provided controls are transparent and effective. This is where NGOs could possibly have a role to play.
As for the galloping prices of other essentials including vegetables, it's another piece in the overall puzzle that too is being looked for. (The writer is a former Head of Corporate and Regulatory Affairs of British American Tobacco, Bangladesh and former Chief Executive Officer of Bangladesh Cricket Board. He can be reached at mahmudurrahman@gmail.com)
Simplification is an art that has its dangers unless properly practiced. In management parlance complex issues are required to be broken down into manageable components in order for all areas to be covered and addressed. The word "manageable" is a key element in that unless the components are within grasp we are in a puzzle that has a crucial part missing.
So when there was the outcry of bringing prices of essentials down, the 'manageable' part of the supply chain namely the cost of production appears to have escaped the attention of most, a notable exception being the Agriculture Minister. She was the first to publicly state that the cost of crop inputs needs to reduce in order for farmers to get a profit on their produce. In other words, lower prices to consumers must take into consideration the cost of production plus a reasonable profit to farmers. And while this applies essentially to the staple grain rice, it is a theory equally valid for other crops including vegetables. In between there is also the issue of the infamous middle-man who hikes up the cost to make a tidy profit without breaking a sweat.
Reality is now sinking in. The Boro crop is coming through at bumper levels mainly because the farmers, who got a good price at the expense of the end-consumer, found it a profitable concern. Now that prices of rice are in the Tk 16-18 kg range at the bottom end, they are worried whether their cost of production, high due to the cost of inputs, will actually deliver them any profits at all. The resilient farmer will complain quietly and then take plan on planting a crop that gives better returns next year. Having taken a hit from potato and wheat, his choice is becoming sorely limited. Tomorrow may be another day but it is unlikely to be a happy one if this, as media reports suggest, is the case.
To a measure some of the election hype may have overdone the "pledges". There lies the issue of "manageable" component. The general public has to be made aware of the supply chain issues and that given international prices and recession crop input costs can only be managed to a certain degree. The upshot is that prices need to be reasonable and that applies to high prices and low prices. Agriculture subsidies are in all probability very much under the government scanner but total control of pricing is not within the remit in a free-market economy. One option could be a semi-free situation for core items provided controls are transparent and effective. This is where NGOs could possibly have a role to play.
As for the galloping prices of other essentials including vegetables, it's another piece in the overall puzzle that too is being looked for. (The writer is a former Head of Corporate and Regulatory Affairs of British American Tobacco, Bangladesh and former Chief Executive Officer of Bangladesh Cricket Board. He can be reached at mahmudurrahman@gmail.com)