The government is likely to reduce the prices of rice and wheat for
open market sales in a bid to clear stocks -- a move that will cost the
state up to Tk 350 crore.
The cuts, which would be the second in four months, come after
disappointing sales through OMS operations due to low prices of the
staples in the market.
Between July last year and January 28 this year, 1,028 tonnes of rice
and 1.14 lakh tonnes of wheat were sold through OMS, according to data
from the food ministry.
A year earlier, 56,832 tonnes of rice and 1.54 lakh tonnes of wheat were sold.
The change in government policy for a couple of social safety net
schemes like the Test Relief (TR) and the Food for Work (FFW) programmes
also contributed to the mounting stocks.
Now, the government will provide a combination of cash and rice and wheat for the programmes.
“The quality of rice will deteriorate unless we sell the stock at reduced prices,” said a senior official of the food ministry.
The price of rice for OMS is likely to be fixed at Tk 15 a kg from Tk
20 now. For wheat, it will be Tk 14 from existing Tk 19 a kg, said
officials of the Directorate General of Food.
To support the price cuts, an additional Tk 300-350 crore may be needed in subsidies.
The amount of subsidy would be much higher if the rice rots in warehouses, the food ministry official said.
The government has allocated Tk 1,863 crore for food subsidy in
fiscal 2015-16, up from Tk 1,620 crore a year earlier, according to the
finance ministry.
“We are afraid the market price will slump if the government sells
rice at this rate,” said Layek Ali, general secretary of the Bangladesh
Auto, Major and Husking Mills Association, which has around 17,000
members.
Millers who have stocks will incur losses, while farmers will have to
sell their produce at low rates. “Many millers will become bank loan
defaulters.”
The price of the Swarna variety of paddy has declined from Tk 650 per
maund to Tk 610 because of the speculation of price cuts by the
government.
“If the government wants to reduce the prices for everyone's benefit,
it should extend support to millers in the form of subsidy,” Ali added.
However, officials of the Directorate General of Food said there
would be no impact on the market as a result of the price cut as only
coarse rice would be sold through OMS.
“The main consumer of coarse rice is poor people and we do not have
medium and fine quality rice that is produced mostly in the country. So,
there will be no impact on the market,” the food ministry official
said.
The prices of coarse rice were between Tk 32 and Tk 34 a kg last
week, down 8.33 percent on the same day a year ago, according to Trading
Corporation of Bangladesh.
So far, the food office bought 1.31 lakh tonnes of rice from aman
harvest against the contract of 1.99 lakh tonnes with millers.
“So, we have no other option but to slash the price of rice and
expand the OMS to clear stocks ahead of boro procurement,” he said,
adding that the DG Food plans to run the OMS operation for two months.
The DG Food bought 10.69 lakh tonnes of boro rice last season and plans to buy about 10 lakh tonnes in the coming season.
Officials said part of the stock could have been cleared had there
been no option of cash payment under the TR and FFW programmes.
The government brought changes to the TR and FFW programmes in fiscal
2014-15: half of the payment for the programmes in exchange for work
would be made in cash.
Previously, the sole mode of payment for the programmes was grains.
In December last year, the finance ministry approved cash payment of
Tk 1,181 crore for the TR and FFW schemes, which is equivalent to the
purchase price of a total of four lakh tonnes of grains.
Subsequently, DG Food revised down its wheat import target to 5.7 lakh tonnes from 9.5 lakh tonnes.
Contacted, Foiz Ahamed, director general of Directorate General of Food, acknowledged the plan to reduce prices.
“We are considering reducing prices. We want to expand OMS operation in district, upazila and municipality levels.”
