Dilemma over duty-free rice imports    

Shamsul Huq Zahid     | Published: June 03, 2018 22:18:23 | Updated: June 04, 2018 21:55:46


The country has seen bumper harvests of two major rice crops---Aman and Boro---this year. The positive development follows a debacle in the production of the main staple last year due to two consecutive floods.

But the bumper output has failed to offer any benefit either to rice-growers or consumers. Rather the farmers are facing a difficult situation because of lower-than-expected price of paddy in the market.

Consumers, naturally, expected a notable fall in prices of rice following bumper production in two consecutive seasons. But their expectation has remained unmet. However, one good thing has happened--- higher imports have helped the rice prices gain stability - though relatively at higher levels.

The primary reason behind such deprivation remains to be the supply-glut of rice. There has reportedly been an unbridled import of the item following the government's decision to waive in full the duty on rice imports. The government has also continued to import from a number of sources to beef up its own food grain stock. But there has been a mad race among the private sector people for importing the main staple.

The deficit of rice last year was estimated at 1.0 million tonnes because of loss of crops in two consecutive floods. As against this, the government and the private sector traders have until now imported 3.7 million tonnes of rice. More 4.5 million tonnes of rice, according to a report published in a leading vernacular daily, are in the import pipeline.

The reasons for higher rice output this year include favourable weather conditions and farmers' efforts to recoup the losses they had suffered due to floods. The farmers had brought an additional land area, measuring 100,000 hectares, under the dry season Boro crop this year and made higher investments, in terms of cost of farm inputs.

But the market realities have turned out to be harsh. The current market price of paddy is reportedly far less than the cost of production. In the latter part of May last year, a maund of Boro paddy used to be sold between Tk.1000 and Tk.1200. Right at this moment, the price hovers between Tk.600 and Tk.850. The cost of production of a maund of rice at the growers' level is estimated at about Tk.900.

The rice prices at the retail level are not, however, showing any sign of downward trend. This is rather an unusual development. Thgis might be linked to the entry of some influential businesspeople in rice import trade. Taking advantage of falling rice prices in neighbouring India, these people have reportedly made substantial import of rice in recent months.

Until last year, importers used to bring in only the coarse varieties of rice, mainly from India. But fine varieties of Indian rice are now occupying a substantial space of both local wholesale and retail rice outlets.

If the import of medium and fine varieties of Indian rice continues, it is feared, the production of many indigenous medium and fine varieties would eventually be stopped. Many local varieties of rice had earlier gone extinct because of high cost of production and low output, some more are now threatened.

More importantly, the role of key players in local rice trade, the millers, has lately become somewhat diluted for a number of factors. They are not now as active in procurement of rice as in the past. They are finding it difficult to get necessary bank loans. Besides, bank loans have become costlier with the hike in their rates. Thus, with the main actors remaining almost inactive in the domestic market, the demand for rice at the field level has remained relatively low.

On the other hand, the rice importers, reportedly, took a substantial volume of loans from banks when the government had waived the duty on rice import with a view to containing the soaring prices of the main staple.

It is the importers, not the millers, who are now dominating the market and dictating the terms. They would not, naturally, want any fall in rice prices, for their warehouses are now filled up with the main staple.

Some people are of the opinion that the government should not have allowed the import of such a large quantity of rice. The import of the item is unusually high compared to the deficit in rice production. Moreover, such a large import has also caused erosion in the country's reserve.

The reported entry of 'influential' businessmen in rice import remains a matter of concern. If the government puts restriction on rice import or imposes duty again, these people might take advantage of the situation and push up prices of the staple artificially. Consumers, who have not gained anything out of duty-waiver, may have to count extra amount for buying rice. It is a tricky and sensitive issue.

The government, obviously, is exercising extra caution as far as rice prices are concerned. In an election year it would not allow destabilisation of rice market in any form. So, the duty waiver might continue for some more time.

zahidmar10@gmail.com  

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