Increasing rice price and its manipulation
Sunday, 11 July 2010
Shahiduzzaman Khan
RICE price is on the rise again in the retail markets without any logical ground. With the government announcement of increase in procurement price, prices of coarse rice went up by Tk 2.0 to Tk 4.0 a kilogram. Supply of coarse rice is also inadequate. Market watchers say any further decline in the supply of coarse rice in the market will lead to further increase in rice prices.
The commerce ministry found that rice prices had increased by Tk 1.0 to Tk 2.0 a kilogram in a week. Up by Tk 2.0 a kilogram in the week, the ordinary grade lali mota rice was retailed between Tk 30 and Tk 31 last week in the city. Coarse variety guti rice was retailed between Tk 34 and Tk 36, up by Tk 3.0 in four days. Price of all varieties of rice has, indeed, increased by Tk 50 to Tk 100 a maund (37.3km) in a week. Market watchers say rice prices have increased because of persistent shortage of paddy supply on the farmers' side.
The food ministry on July 1 decided to offer Tk 3.0 in cash incentive on the purchase of a kilogram of rice as it was failing to procure rice because of the prevailing high market price. By the end of June, the government could procure only 0.26 million tonnes of rice against the target of 1.2 million tonnes. The dealers made more profit from the market by not selling the rice to the government for Tk 25 a kilogram.
The government believes some traders are manipulating the market.
According to reports, the government would intervene in the market by using all options of public food distribution system such as food for work, test relief and even open market sales to keep the prices stable. Referring to price gap of almost Tk 100 in the price of per maund paddy between Barisal and Natore, the minister observed the traders are trying to make a windfall profit out of 'wrong speculations' about shortage of food at home and abroad. They are deliberately raising the rice prices although there is no reason that price would rise at this point of time. The country has enough stock to flood the market and all rice growing countries excepting India had a good harvest.
The government has a stock of 1.12 million tonnes of food grains - mostly rice and also some wheat - while about 0.25 million tonnes of wheat would be imported from Ukraine and Russia in the next two months. Myanmar offered to supply 0.2 million tonnes of rice within a short span of time, if Bangladesh wanted it. The government would use its own stock to stabilise the market which had its own 'dynamics' affected by demand and supply, the minister claimed. However, the government is yet to take any palpable measures against those who were believed to have been involved in manipulation of prices of sugar and cooking oil in recent times, despite the ruling party's pre-polls pledge to eliminate hoarding and profiteering syndicates.
The government recently asked all deputy commissioners (DCs) to identify and take action against the local money lenders who are increasing rice price artificially. The commerce ministry in a letter informed the DCs that some of the money lenders were engaged in 'future trade' by purchasing paddy from fields before the crops are cultivated at a lower price. The lenders then sell the price at higher rate in local markets across the country causing increase in rice price.
The ministry also alleged that the lenders were continuing their business by taking loan from commercial banks. The top administrations in the districts and the Bangladesh Bank have been asked to take measures to prevent activities of the money lenders engaged in rice price manipulation.
Many local money lenders had already purchased rice of paddy fields with the credit taken from the commercial banks. They will sell the rice at a price which is 30 to 40 per cent more than that of usual price in market. This has to be checked. Besides, the commerce ministry needs to bring amendment to The Essential Articles (Price Control and Anti-Hoarding), Act 1953 to contain the activities of the unscrupulous businessmen.
Meanwhile, the Bangladesh Bank slashed time limit for repayment of rice purchasing loan, received by rice millers and traders, to ensure smooth supply of the essential in local markets. Under the new rules, the millers will have to repay their rice purchasing loans within 60 days instead of 90 days while rice traders must repay their loans within 45 days. The central bank issued a circular in this connection recently, asking all commercial banks to re-fix the repayment period for rice purchasing credit received by millers and traders. The annual demand for rice is about three crore tonnes and the annual shortfall varies between 3.0 million and 7.0 million tonnes, which are imported.
An official probe report says price manipulation by Kushtia mill owners is one of the main reasons behind the recent rice price hike in the capital as well as some other parts of the country. The probe committee, formed by the Kushtia district administration, found out that the millers in Kushtia's Khajanagar arbitrarily hiked rice price on the pretext of increased paddy price but failed to show documents on any recent paddy purchase. Khajanagar is one of the country's biggest rice trading hubs with concentration of around 500 rice mills there. The investigation body also said each of the millers has huge rice stocks in warehouses. Rice traders in Dhaka and elsewhere are fixing prices even higher after buying from the millers, they added.
The Kushtia mill owners, however, denied their role behind price hike saying the cost of paddy has shot up by about Tk 100 a maund in last one month. The millers in Khajanagar alleged that the rice traders in Dhaka are selling rice at Tk 1,325 to 1,350 a maund to make extra profit just putting the blame on the millers.
However, in order to address the emerging situation, strict vigilance should be there over the import, storage and distribution of rice to prevent hoarding and manipulation of prices. Enquiries should also be made to find out if the bureaucracy was responsible for deliberately creating the mess in the whole process of distributing food grains with the ulterior motive of creating law and order problem in the country. Because food is an issue on which the poor countrymen would not make any compromise. Any slightest of variations in rice price has a cascading effect on the overall economy.
Government support should come in terms of proper and uninterrupted supplies of farm inputs, price support in the form of procuring farm output directly from the growers, ensuring fertiliser and diesel subsidy for irrigation, and guaranteeing that enhanced amount of agro-credit goes to those farmers who need the credit.
szkhan@dkaka,net
RICE price is on the rise again in the retail markets without any logical ground. With the government announcement of increase in procurement price, prices of coarse rice went up by Tk 2.0 to Tk 4.0 a kilogram. Supply of coarse rice is also inadequate. Market watchers say any further decline in the supply of coarse rice in the market will lead to further increase in rice prices.
The commerce ministry found that rice prices had increased by Tk 1.0 to Tk 2.0 a kilogram in a week. Up by Tk 2.0 a kilogram in the week, the ordinary grade lali mota rice was retailed between Tk 30 and Tk 31 last week in the city. Coarse variety guti rice was retailed between Tk 34 and Tk 36, up by Tk 3.0 in four days. Price of all varieties of rice has, indeed, increased by Tk 50 to Tk 100 a maund (37.3km) in a week. Market watchers say rice prices have increased because of persistent shortage of paddy supply on the farmers' side.
The food ministry on July 1 decided to offer Tk 3.0 in cash incentive on the purchase of a kilogram of rice as it was failing to procure rice because of the prevailing high market price. By the end of June, the government could procure only 0.26 million tonnes of rice against the target of 1.2 million tonnes. The dealers made more profit from the market by not selling the rice to the government for Tk 25 a kilogram.
The government believes some traders are manipulating the market.
According to reports, the government would intervene in the market by using all options of public food distribution system such as food for work, test relief and even open market sales to keep the prices stable. Referring to price gap of almost Tk 100 in the price of per maund paddy between Barisal and Natore, the minister observed the traders are trying to make a windfall profit out of 'wrong speculations' about shortage of food at home and abroad. They are deliberately raising the rice prices although there is no reason that price would rise at this point of time. The country has enough stock to flood the market and all rice growing countries excepting India had a good harvest.
The government has a stock of 1.12 million tonnes of food grains - mostly rice and also some wheat - while about 0.25 million tonnes of wheat would be imported from Ukraine and Russia in the next two months. Myanmar offered to supply 0.2 million tonnes of rice within a short span of time, if Bangladesh wanted it. The government would use its own stock to stabilise the market which had its own 'dynamics' affected by demand and supply, the minister claimed. However, the government is yet to take any palpable measures against those who were believed to have been involved in manipulation of prices of sugar and cooking oil in recent times, despite the ruling party's pre-polls pledge to eliminate hoarding and profiteering syndicates.
The government recently asked all deputy commissioners (DCs) to identify and take action against the local money lenders who are increasing rice price artificially. The commerce ministry in a letter informed the DCs that some of the money lenders were engaged in 'future trade' by purchasing paddy from fields before the crops are cultivated at a lower price. The lenders then sell the price at higher rate in local markets across the country causing increase in rice price.
The ministry also alleged that the lenders were continuing their business by taking loan from commercial banks. The top administrations in the districts and the Bangladesh Bank have been asked to take measures to prevent activities of the money lenders engaged in rice price manipulation.
Many local money lenders had already purchased rice of paddy fields with the credit taken from the commercial banks. They will sell the rice at a price which is 30 to 40 per cent more than that of usual price in market. This has to be checked. Besides, the commerce ministry needs to bring amendment to The Essential Articles (Price Control and Anti-Hoarding), Act 1953 to contain the activities of the unscrupulous businessmen.
Meanwhile, the Bangladesh Bank slashed time limit for repayment of rice purchasing loan, received by rice millers and traders, to ensure smooth supply of the essential in local markets. Under the new rules, the millers will have to repay their rice purchasing loans within 60 days instead of 90 days while rice traders must repay their loans within 45 days. The central bank issued a circular in this connection recently, asking all commercial banks to re-fix the repayment period for rice purchasing credit received by millers and traders. The annual demand for rice is about three crore tonnes and the annual shortfall varies between 3.0 million and 7.0 million tonnes, which are imported.
An official probe report says price manipulation by Kushtia mill owners is one of the main reasons behind the recent rice price hike in the capital as well as some other parts of the country. The probe committee, formed by the Kushtia district administration, found out that the millers in Kushtia's Khajanagar arbitrarily hiked rice price on the pretext of increased paddy price but failed to show documents on any recent paddy purchase. Khajanagar is one of the country's biggest rice trading hubs with concentration of around 500 rice mills there. The investigation body also said each of the millers has huge rice stocks in warehouses. Rice traders in Dhaka and elsewhere are fixing prices even higher after buying from the millers, they added.
The Kushtia mill owners, however, denied their role behind price hike saying the cost of paddy has shot up by about Tk 100 a maund in last one month. The millers in Khajanagar alleged that the rice traders in Dhaka are selling rice at Tk 1,325 to 1,350 a maund to make extra profit just putting the blame on the millers.
However, in order to address the emerging situation, strict vigilance should be there over the import, storage and distribution of rice to prevent hoarding and manipulation of prices. Enquiries should also be made to find out if the bureaucracy was responsible for deliberately creating the mess in the whole process of distributing food grains with the ulterior motive of creating law and order problem in the country. Because food is an issue on which the poor countrymen would not make any compromise. Any slightest of variations in rice price has a cascading effect on the overall economy.
Government support should come in terms of proper and uninterrupted supplies of farm inputs, price support in the form of procuring farm output directly from the growers, ensuring fertiliser and diesel subsidy for irrigation, and guaranteeing that enhanced amount of agro-credit goes to those farmers who need the credit.
szkhan@dkaka,net