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The Financial Express

Countering syndicated business


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Countering syndicated business

The findings by the Bangladesh Agricultural Research Council (BARC) have not shed any new light but only confirmed the popular perception that business malpractices and a lack of government intervention were responsible for price hike of rice, potato and onion during the past few months. Defying the seasonal trend, the staple market heated up even in the harvesting season. The reason behind it was plain and simple: rice millers hoarded paddy in anticipation of a drastic production fall and the government procurement drive -- lacking in enough intent and clear purpose over the years -- was a disaster this time. This fault line was diagnosed months back and referred to in this column.

When a psychological war was going on over the fixing of rice price between the government and millers, it was the former that had to concede to the demand of the latter for an increase in the price tag set in order to stabilise the staple market. Even then the millers did not comply with the revised prices for both coarse and fine varieties of rice. They knew the government had half the stock it had a year ago in its godowns. However, the government then looked for the only alternative option it had open to it -- to import. At this stage, it faced the dilemma of not harming farmers' interests by lowering import duty to a level where import causes a drastic fall of rice price in the local market.

Private importers reportedly are not showing interest in importing rice at the current rate of import duty; they are demanding further duty slash. With just 0.65 million tonnes of paddy procurement in the Aman harvesting season, the government's buffer stock hardly looks reassuring. What is notable here is that 55 per cent of Boro paddy yield was sold within a month this harvesting season as against the previous season. This points to the fact that farmers who could hold their produce back did so on the presumption that food price would be dearer in the coming months. More importantly, the market players did what they do best of all -- do hoarding to their satisfaction with the sole intention of manipulating the market through syndication.

Global food crisis is likely to deepen with more and more people losing their jobs and livelihoods on account of the shockwaves of the pandemic. The low-income countries will find it particularly difficult to feed their vulnerable segments because of vaccine nationalism which has now turned out to be a contentious economic policy. Notwithstanding the repeated warning from the World Health Organisation, the divide between the rich and the poor in terms of access to vaccination is developing an unbridgeable chasm. Nothing to be surprised, if the global ripple effects are misused to their advantage by business syndicates here for creating an artificial food crisis.

Next the potato price hike was quite baffling. It is the only starch plus vegetable that can more than supplement staple. For years the country has been producing surplus potato and its price remained stable. But taking advantage of the pandemic, traders created an artificial crisis of this common root vegetable on the plea of transportation problem. In fact, the big hoarders released it slowly in order to raise price. Clearly, growers have again been deprived of the extra profit like paddy farmers who have to sell their corn immediately after harvest to meet various stalled requirements.

However, the classic case of trading dishonesty and outrageous profiteering is highlighted by the skyrocketing of prices from Tk 35 to Tk 70 a kilogram of onion overnight. The day India announced an export ban on onion, the next day price of the item shot up to that abnormal level. Anyone can see through the unethical business and yet the government and the consumers appear to be powerless. An immoral trade practice is on to accumulate as much wealth as possible within the shortest possible time. Or else, who with a heart in his/her right place can subject the poor to an artificially created ordeal in time of the worst pandemic in human history?

So, this is where the government role has come under scathing review. The Bangladesh Rice Research Institute (BRRI) has rightly suggested creation of a buffer stock of each of these items. The rice stock has to be 10 per cent of the production to the tune of 2.5 million tonnes. Similarly, an adequate buffer stock of potato can catapult the government from any crisis to the shore. At the same time, the government must adopt pro-farmer policies by not importing any of the items during harvest. Import of onion has been one such misjudged step. A wiser decision would be to procure such items during harvest time to ensure fair price at the growers' level. Procurement pricing should be fixed, leaving a margin of at least 10 per cent profit on the total cost for cultivation.     

So far government initiatives have been reactive rather than proactive. If the government means business, it should procure produces directly from farmers. To do so, it can use its agricultural extension offices. But to make such a programme successful, there is a need for a pool of government transports --trucks and wagons -- that will carry produces at a much cheaper rate than does the existing private arrangement. 

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