Rice prices soar as millers capitalise on little imports

By | February 28, 2017

The retail prices of rice went up as high as 23 per cent in the last six months as millers were allegedly taking advantage of almost no import of the coarse varieties that majority people consume.

Importers said they were not importing the coarse varieties of rice due to 25 per cent duty that has made imports costlier than local rice.

The price hike of different varieties of rice ranged between 6 to 23 per cent during the period, according to official figures, showing higher rate of hike for the mostly consumed varieties and lower rate of increase for the less consumed varieties.

Market observers, however, said that the import restriction should have little impact on the price hike as imports meet very insignificant percentage of the country’s demand, which is also much lower than local production.

The country produced 34.57 million tonnes of rice against a 31.0 million tonnes of demand in FY’16, according to Bangladesh Bureau of Statistics and Directorate General of Food (DGoF).

But the prices went up even in the peak harvesting season, said the observers.

Consumers Association of Bangladesh (CAB) Secretary Humayun Kabir Bhuiyan said millers were pocketing hefty profits, depriving both the farmers and consumers.

He said the millers’ cost for Jeerashail or Miniket, Boro season variety, was maximum Tk 33-Tk 34 a kg as paddy price was highest Tk 750 a maund.

“But they are selling the variety at Tk 44-Tk 54 a kg,” he added.

Md Sarwar Alam Kajol, a Naogaon based importer, said the import of daily edible rice remained almost halted, following the imposition of the duty.

He said the import cost of Indian Swarna now stands at Tk 36-Tk 37 a kg as compared to Tk 32-Tk 33 a kg at the local mills.

The import declined sharply to only 41,000 tonnes worth around US $ 20 million in the first seven months of the current fiscal year (FY’17), which was much lower than 0.19 million tonnes worth $ 61 million in the corresponding period of last FY, according to the Food Ministry data.

The period’s import was lowest in last four financial years. The period’s decade low was recorded at 0.04 million tonnes in FY’13.

Market observers viewed that the imposition of the duties might have discouraged the private imports this fiscal year, apparently affecting the supply side to some extent if not much.

Under this situation, many millers are believed to have taken the advantage of seeking higher prices although the farmers were also getting some dividends.

Rice were now selling at Tk 32 (coarse) per kg to Tk 48 (finer) at village level as against Tk 26 to Tk 44 in 2015-16, according to the Department of Agricultural Marketing (DAM).

However, Trading Corporation of Bangladesh (TCB) said rice prices increased by Tk 4 – Tk 6 a kg in Dhaka in the last six months.

The prices of finer varieties like Miniket, Jeerashail, Najirshail increased by Tk 4 a kg; medium quality Brridhan-28, Lata and coarse variety of Swarna by Tk 6 a kg in the country, according to the TCB and DAM.

The TCB data also revealed the prices increased even in peak Aman harvesting season (November-January, FY’17).

However, having a zero duty facility, the private sector had imported a huge quantity of rice during the period from FY’14 to FY’16.

Rice import hit an all time-high of 1.49 million tonnes worth $ 350 million in FY’15.

“The outcome was a price debacle during the harvesting seasons as local production was also an all-time high of 34.7 million tones,” additional secretary to the Ministry of Agriculture Md Mosharaf Hossain said.

He said the low prices of paddy persisted during all the harvesting seasons from 2014 and 2016 (Boro season).

“And the consequence was that many of the farmers shifted to other crops which caused decline in production of rice to 34.57 million tonnes in FY’16,” he said.

“Boro cropping area reduced by above 0.12 million hectares in the last FY,” he added.

He said higher import duty should be continued to help farmers getting fare prices, which is necessary to keep them in rice cultivation.

Asked, President of Bangladesh Auto Major Husking Mills Association Md Abdur Rashid said traders can store paddy or rice for maximum 60 days.

“We are buying finer paddy from the local market now at Tk 1050-Tk 1150 a maund,” he said.

However, to help farmers and to maintain higher production, the government removed zero duty facility on rice import from middle of FY’16, which was increased to 25 per cent from FY’17.

Paddy was selling at Tk 760-Tk 820 (coarse variety) and Tk 800 -Tk 950 (aromatic) a maund (40 kg) during the Aman harvest season that ended last month, said DAM assistant director T M Rashed Khan.

He said the paddy price was only Tk 450 to Tk 750 a maund in last seven harvesting seasons from 2014 to 2016 against a production cost of Tk 740 to Tk 800.

Executive director of the local think tank Center for Policy Dialogue (CPD) Dr Fahmida Khatun said that a dilemma always persisted over initiating the rice import policy as the policy makers take into account fair price for farmers in one hand and interest of consumers on the other.

“The import policy should have checks and balances. Import restriction could be lessened for a period of time to reduce the consumers’ woes,” she added.

But the price trend of rice and the rate of inflation of last few years should also be taken into consideration to see whether real price of the staple increased or not, said Dr Fahmida.

“The national statistical agencies will have to provide authentic data on local demand and supply on quick and regular basis,” she added.