Supporting farmers in Bangladesh

A revamped rice procurement policy would reward the hard work of Bangladeshi farmers and protect the country’s food security at the same time, Md Roushon Jamal writes.

Rice security has been a big issue in Bangladesh for many years. Per capita rice consumption in Bangladesh is still the highest in the world and affordable rice availability is an ongoing and pressing policy concern for the government.

However, steady domestic production growth has stabilised rice security for the growing population, and last year Bangladesh became the third largest producer of rice in the world.

Indeed, rice farmers have been the heroes of Bangladesh’s economy in the last few decades. Yet public policy failures, especially in the last two rice seasons, have resulted in the country importing rice even in a domestic surplus, lowering prices through this oversupply and damaging the livelihoods of rice farmers.

Bangladesh uses a public procurement system – where the government influences the supply of rice by purchasing large amounts of rice from millers – as an instrument for buffering domestic rice stocks, intervening in the retail market, and influencing wholesale rice prices.

In the existing procurement policy, the Directorate General of Food usually procures seven to eight per cent of the country’s total rice output, amounting to just 0.7 per cent of the average farmer’s paddy crop.

The current level of rice procurement is simply too small and has very little power to raise paddy prices for farmers, something the government should pursue, given its domestic surplus, to support the livelihoods of farmers and to shore up its stores of rice in a global crisis.

More on this: From the rice basket to retail

Last year, the COVID-19 pandemic prompted the government to build a larger than usual public stock to manage any unpredictable supply or a price crisis that may come from the pandemic’s economic shock.

Accordingly, the government planned to procure 1.8 million tonnes (1.0 million tonnes of milled rice and 0.8 million tonnes of paddy) of Boro rice (dry season rice) and 0.65 million tonnes of Aman rice (wet season rice) in the 2020-21 financial year. However, the Directorate General of Food achieved only 50 per cent of the Boro procurement target. As of 31 January, the Aman rice procurement drive had reached an even more dismal 7.2 per cent of that target.

So what happened? Importantly, before rice can be sold it is farmed as paddy, which has to be processed in a mill before it becomes rice, and last year, rice millers did not honour an agreement with the government to supply rice through the procurement program, claiming the set price was too low.

This was despite the fact that in 2019 they made a considerable profit from the public procurement system. The government failed to put any legislative pressure on millers and landed itself in an embarrassing situation with insufficient public rice stock, forcing it to import rice despite the surplus and leaving paddy farmers in the lurch.

In August 2020, the Bangladesh Rice Research Institute arranged a national seminar to discuss a policy direction for rice security in the country. Despite the government’s failure to secure all the rice it wanted, there remains more than enough domestic surplus to last until the next Boro harvest in April 2021. The experts in the seminar suggested the government procure rice from domestic millers using an open tender process to achieve the rice security targets.

More on this: The future of food in Pakistan

They clarified that a small import – of 0.1 to 0.3 million tonnes – at the government level would not be a disaster if it was essential. However, given the negative impacts of rice imports on the paddy market, the agriculture minister, rice experts, and delegates from the International Food Policy Research Institute and International Rice Research Institute suggested a very cautious approach to importing rice for food security, emphasising the need to take advantage of the domestic surplus.

Despite this advice, in January the Ministry of Food decided to import one million metric tons of rice with a reduced tariff, three times the size of the recommendation.

As a result of this oversupply, domestic paddy prices started to fall and have already crashed by 15 to 20 per cent. With no impact on rice prices, this indicates that millers are passing the shortfall onto farmers.

This means that despite commendable production success amid the COVID-19 pandemic, 13 million rice farmers are facing falling paddy prices, undermining their livelihoods. This issue is being ignored and is depriving millions of rice farmers of income.

As well as an open tender process to meet current targets, there are longer-term alternatives to the procurement issue. One example is procurement policy in West Bengal, India. Using an e-procurement system, the state government there has been procuring roughly 20 per cent of total rice equivalent worth of paddy directly from farmers each year since 2016.

Under the system, rice farmers directly sell their paddy to centralised procurement centres (CPC) at a set price. The state government then designates custom milled rice (CMR) agencies to collect paddy from the CPC and mill the paddy into rice. Both farmers and CMR agencies get transportation allowances to cover the costs of this process.

Then, the CMR agencies supply milled rice to the government at a set price. Nearly 2.36 million of West Bengal’s rice farmers participated in this e-procurement system in 2019.

Both farmers and rice millers are satisfied with this e-procurement system, and the larger amount of direct procurement from farmers gives the government significant power to regulate the rice and paddy market. Accordingly, the International Food Policy Research Institute has recommended West Bengal’s paddy procurement model as a good option for Bangladesh’s procurement system.

If this goes ahead, fair prices to protect farmers’ incomes must be the top priority of the policy. Bangladesh should also incorporate legal instruments into such a procurement policy to make rice millers and traders more accountable.

To achieve both food security and economic justice for its 13 million rice farmers, Bangladesh’s government must formulate a farmer-friendly procurement policy that focuses on a fair price for rice and uses domestic rice producers to fill food security stores, not resort to panicked imports.