Bangladesh: Government move appears unable to stem rising rice prices

News and Press Release
Originally published
DHAKA, 17 January 2008 (IRIN) - Government efforts to soften the blow of rising food costs appear to be failing.

In response to the rising price of rice, a staple food item in Bangladesh, the military-backed caretaker government introduced its open market sale (OMS) of coarse rice at subsidised rates from 9 January.

The idea is that by subsidising coarse rice the government can ease pressure on fine rice prices, by reducing demand for the latter (so more people go for the coarse rice). But the scheme appeared not to be working because fine rice prices were creeping up on 14 January despite the move.

Owing largely to rising international commodity prices and fuel costs, food prices in Bangladesh, an impoverished nation of over 150 million inhabitants, have become prohibitively high for many people.

Moreover, two rounds of heavy monsoon floods, followed by Cyclone Sidr, which devastated paddy fields in 11 of the country's 64 districts last year, has exacerbated the situation.

Coarse rice sales

Under the government's current OMS programme, coarse rice is sold by close to 2,000 dealers nationwide, with more than 25,000 metric tonnes (mt) allocated for the purpose.

The price of coarse rice is US$0.37 per kg. It was $0.28 a kg under the programme in September-October last year and $0.19 a kg in late 2006.

Customers can buy 3 kg of coarse rice a day, with each dealer receiving only 850 kgs of rice on alternate days and 12.75 mt of rice per month - and, according to ANM Shafiul Alam, chief controller of food, the OMS programme may continue until April. Yet so far the scheme, initiated whenever a potential food crisis is perceived in which prices can rise rapidly, has yet to have the desired effect.

Price of fine rice varieties rises

Although the price of coarse rice came down by $ 0.06 per kg since 9 January, a slight increase in the price of fine rice on the wholesale market in Dhaka was already being reported on 14 January.

Retailers at Badamtali, Karwan Bazar and Mohammadpur Krishi markets - three major wholesale rice markets in Dhaka which sell mainly locally produced rice, say the price is high because they buy at high rates from the producers.

"We have to sell at a minimum of 12 percent higher than the rate at which we procure the commodity. Otherwise, we go broke," said Hazi Shahadatullah, a retailer at Krishi market.

The president of the Bangladesh Economic Association, Quazi Kholiquzzaman Ahmed, blamed the government for failing to put in place proper market monitoring and not making timely decisions to increase the commodity's supply.

"Although the twin floods which took place more than three months ago cut down on agricultural production, the government has failed to import food grains to create a buffer stock much ahead of the present crisis," Ahmed complained.

Over half a million families to get food aid

Meanwhile, the government aims to provide 570,000 endemically poor families with food grains for five months under its vulnerable group feeding programme, as well as import 100,000 mt of rice from Vietnam as part of its efforts to tackle the ongoing crisis, Finance Adviser Mirza Azizul Islam told reporters on 13 January.

The Committee on Public Purchase has approved a proposal to buy 75,000 mt of rice from the international market, Islam said.

ne day earlier, Bangladesh's chief adviser and government head, announced they would import 1.1 million mt of rice from India, Thailand, Myanmar and Vietnam. The advisory council also discussed rationing food for the middle class.

"The price of food items has got out of reach of the poor and the limited income people," said Quazi Faruk, general secretary of the Consumers' Association of Bangladesh.

"It is a matter of disappointment for the people as the government has failed to contain the price spiral of essential commodities. Even OMS is not having any positive impact on the market," Faruk said.