How good is the claim of a supply side response
Thursday, 20 March 2008
Enayet Rasul
ADVISERS in the government have reiterated, time and again, that the government realises how the problems of scarcities, shortages, high prices and inflation call for a supply-side response and that they have been providing the same to the best of their abilities. Only days ago, the Finance Adviser stated that the government understands that the current economic problems can be mitigated by a supply-side response and the government has been vigorously pursuing policies to that end.
If supply-side policies were being effectively applied, then the country would not be so short of a vital commodity such as fertiliser. It is the key product to ensure agricultural recovery or higher agricultural productivity when the economy has been reeling from shocks generated by a major slump in agricultural production in the wake of a series of natural disasters. Farmers demonstrated at various parts of the country, demanding adequate supplies of fertilisers during the last Aman season. They barricaded roads, surrounded the offices of the district administration and district agricultural officers and went on rampages at some places.
But the government's reaction to those incidents at that time was remarkably a low profile one as if those were but mere propaganda in the media. A former Adviser who vacated her post only some months ago, is remembered for her suggestion that the fertiliser crisis was only limited to the imagination of the media and that no such situation existed in reality.
But it is turning out to be extremely difficult to conjure up a false sense of security about fertiliser any further. Thus, the agriculture secretary was noted for telling a news agency about a week ago that government needs to import 1.3 millions tonnes of fertilisers. He confessed in that interview that deficit of urea fertiliser ranged between 0.7 and 0.8 million tonnes. So, the question that cannot be avoided is : why is this late reckoning and why is this late admission of the actual insufficient production or availability of a very vital agro-input when its utilisation in the right quantities and at the right time could mean the harvesting of a good crop leading to food security and a drop in the soaring price of foodgrains? Farmers have been trying every means to draw attention to their plight of not getting fertiliser in time or the irregularities and price manipulations by some sections of traders involved in selling it to them. Meanwhile, newspaper reports appeared often about the smuggling out of precious fertilisers to neighbouring countries. It was also known that the country's main fertiliser factory remained shut and could not produce urea. So, the factors building up a crisis situation in respect of fertilisers were spotted long ago. But all the warnings and imploring were ignored as if everything was going well in supplying fertilisers to farmers.
If enough fertiliser was not being produced in the country, then every effort should have been made to arrange for its import in time. It could be imported well in advance to coincide with the start of the current Boro crop growing season so that farmers would face no problem in getting it in the demanded amounts. But that was not done. Strange indecision about importing fertilisers helped the creation of a crisis. But the fertilisers could be imported and distributed efficiently through the government-operated distribution channels or the private sector should have been allowed to import it and sell it like other commodities. In that case also, farmers could buy the commodity from open markets and they would possibly not so much mind even paying higher than normal prices for the same. Now, under the government-controlled distribution system through dealers, the individual farmer finds his requirement partially met. He is forced to buy only the amount the dealer is pleased to sell to him and no more. If he needs 40 kgs for his five acre lands, he gets supplied with, say, only 10 kgs. Thus, it needs no stretch of the imagination to think of underproductivity of the boro crops from insufficient fertiliser application. But the government declared that it is pinning high hopes on a rebound of the economy to take place from a successful harvest of Boro rice. It was also said that all efforts were concentrated to that end. But the poor fertiliser availability contradicts such optimistic declarations. The contemplated import of 1.3 million tonnes of fertilisers will take time and by that time the Boro cropping season would be over. So, the imported fertilisers would have not much immediate use.
Bangladesh produced less rice in the last aman rice growing season due to natural disasters and man-made reasons. Keeping rice price bearable in the market was seen to be dependent on carrying out enough imports of rice in time to build the food security. The starting of the import operations of rice with some zest months ago could have been very useful or cost-saving in many ways. India first offered to sell rice to Bangladesh at around $400 per tonne. But that rate was quickly revised first to $ 500 and now to $650. But the government is still fruitlessly concentrating all its efforts of importing rice only from India and uselessly trying the diplomatic channel for the purpose. But it had other options open to it all the time.
For example, it could make the necessary import of rice from Thailand and Myanmar at favourable prices. Meanwhile, rice stocks in the country from the last aman rice growing season are depleting and the scarcity of the foodgrain is expected to show up fairly soon. But none would get the opportunity to exploit this food gap mischievously if imports were carried out in time to bridge the gap. The shortfall of foodgrains is estimated to be in the neighbourhood of four million tonnes. Only part of that shortfall can be met from the amounts of foodgrains that have been imported. Thus, in the coming months rice prices may rise further from its already very high level to the great detriment of the poor consumers of Bangladesh.
But this situation could be avoided if timely decisions were taken and executed to import rice from the best sources. But now, even these other sources may turn mischievous and demand higher prices than the ones quoted earlier sensing Bangladesh's desperation and we will have none but ourselves to blame for such a development.
ADVISERS in the government have reiterated, time and again, that the government realises how the problems of scarcities, shortages, high prices and inflation call for a supply-side response and that they have been providing the same to the best of their abilities. Only days ago, the Finance Adviser stated that the government understands that the current economic problems can be mitigated by a supply-side response and the government has been vigorously pursuing policies to that end.
If supply-side policies were being effectively applied, then the country would not be so short of a vital commodity such as fertiliser. It is the key product to ensure agricultural recovery or higher agricultural productivity when the economy has been reeling from shocks generated by a major slump in agricultural production in the wake of a series of natural disasters. Farmers demonstrated at various parts of the country, demanding adequate supplies of fertilisers during the last Aman season. They barricaded roads, surrounded the offices of the district administration and district agricultural officers and went on rampages at some places.
But the government's reaction to those incidents at that time was remarkably a low profile one as if those were but mere propaganda in the media. A former Adviser who vacated her post only some months ago, is remembered for her suggestion that the fertiliser crisis was only limited to the imagination of the media and that no such situation existed in reality.
But it is turning out to be extremely difficult to conjure up a false sense of security about fertiliser any further. Thus, the agriculture secretary was noted for telling a news agency about a week ago that government needs to import 1.3 millions tonnes of fertilisers. He confessed in that interview that deficit of urea fertiliser ranged between 0.7 and 0.8 million tonnes. So, the question that cannot be avoided is : why is this late reckoning and why is this late admission of the actual insufficient production or availability of a very vital agro-input when its utilisation in the right quantities and at the right time could mean the harvesting of a good crop leading to food security and a drop in the soaring price of foodgrains? Farmers have been trying every means to draw attention to their plight of not getting fertiliser in time or the irregularities and price manipulations by some sections of traders involved in selling it to them. Meanwhile, newspaper reports appeared often about the smuggling out of precious fertilisers to neighbouring countries. It was also known that the country's main fertiliser factory remained shut and could not produce urea. So, the factors building up a crisis situation in respect of fertilisers were spotted long ago. But all the warnings and imploring were ignored as if everything was going well in supplying fertilisers to farmers.
If enough fertiliser was not being produced in the country, then every effort should have been made to arrange for its import in time. It could be imported well in advance to coincide with the start of the current Boro crop growing season so that farmers would face no problem in getting it in the demanded amounts. But that was not done. Strange indecision about importing fertilisers helped the creation of a crisis. But the fertilisers could be imported and distributed efficiently through the government-operated distribution channels or the private sector should have been allowed to import it and sell it like other commodities. In that case also, farmers could buy the commodity from open markets and they would possibly not so much mind even paying higher than normal prices for the same. Now, under the government-controlled distribution system through dealers, the individual farmer finds his requirement partially met. He is forced to buy only the amount the dealer is pleased to sell to him and no more. If he needs 40 kgs for his five acre lands, he gets supplied with, say, only 10 kgs. Thus, it needs no stretch of the imagination to think of underproductivity of the boro crops from insufficient fertiliser application. But the government declared that it is pinning high hopes on a rebound of the economy to take place from a successful harvest of Boro rice. It was also said that all efforts were concentrated to that end. But the poor fertiliser availability contradicts such optimistic declarations. The contemplated import of 1.3 million tonnes of fertilisers will take time and by that time the Boro cropping season would be over. So, the imported fertilisers would have not much immediate use.
Bangladesh produced less rice in the last aman rice growing season due to natural disasters and man-made reasons. Keeping rice price bearable in the market was seen to be dependent on carrying out enough imports of rice in time to build the food security. The starting of the import operations of rice with some zest months ago could have been very useful or cost-saving in many ways. India first offered to sell rice to Bangladesh at around $400 per tonne. But that rate was quickly revised first to $ 500 and now to $650. But the government is still fruitlessly concentrating all its efforts of importing rice only from India and uselessly trying the diplomatic channel for the purpose. But it had other options open to it all the time.
For example, it could make the necessary import of rice from Thailand and Myanmar at favourable prices. Meanwhile, rice stocks in the country from the last aman rice growing season are depleting and the scarcity of the foodgrain is expected to show up fairly soon. But none would get the opportunity to exploit this food gap mischievously if imports were carried out in time to bridge the gap. The shortfall of foodgrains is estimated to be in the neighbourhood of four million tonnes. Only part of that shortfall can be met from the amounts of foodgrains that have been imported. Thus, in the coming months rice prices may rise further from its already very high level to the great detriment of the poor consumers of Bangladesh.
But this situation could be avoided if timely decisions were taken and executed to import rice from the best sources. But now, even these other sources may turn mischievous and demand higher prices than the ones quoted earlier sensing Bangladesh's desperation and we will have none but ourselves to blame for such a development.