The rising price of rice

In recent years, there has been no price hike of essentials during this time of the year. According to information available from the food and disaster management ministry, the average wholesale price of coarse rice in the last week of July fluctuated between Tk 1600 and Tk 1625 per quintal (Tk 16 to 16.25 per kg). The average wholesale price of coarse rice in July 2001, 2002, 2003 and 2004 was Tk 1103, 1107, 1228, and 1296 per quintal respectively (Tk 11.03, 11. 07, 12. 28, and 12. 96 per kg respectively).

Compared to last four years' July price, the price of coarse rice in July this year marked a rise between Tk 300 and Tk 500 a quintal. The price of medium and fine quality rice has been much higher. The price of coarse rice has been cited in view of the fact that more than 80 per cent of the people in the country eat coarse rice.

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Why is the price of rice spiralling at this time of the year?

First, even a good boro harvest (production stood at 140 lakh tonnes against the target of 137 lakh tonnes) could not meet the shortfall in aus and aman production. Available information suggests that domestic foodgrain production fell short by at least 12 lakh tonnes in 2004-2005.

Second, food aid has sharply decreased in the recent years. While the yearly food aid amounted to 9 plus lakh tonnes in the nineties, the yearly food aid during the last three years varied between 2.54 lakh tonnes and 2.91 lakh tonnes.

Third, since the mid-nineties, the private sector has been playing an important role in importing foodgrains to meet the gap between demand and supply of foodgrains, particularly rice. But the gradual depreciation of the taka has discouraged the private sector to import foodgrains, particularly rice. As a result, there was insignificant import of rice in the private sector during the last few months. The unrestrained hike in the price of US dollar will see many import-dependent essentials including rice and flour getting dearer, further pushing up inflation.

Fourth, food and disaster management ministry's drive for internal procurement of aman and wheat to build up security stock completely failed due to serious shortfall of production and higher prices of rice and wheat in the open market compared to the government administered prices. The government has taken up a programme to procure 10 lakh tonnes of boro by August to build up the food security stock. About 7 lakh tonnes of rice have reportedly been procured so far. Unlike in previous years, this year millers are supplying two-thirds of their rice to the government to meet the procurement target. This has allegedly resulted in insufficient supply of rice in the markets and thereby led to the rise in the price.

Fifth, the recent increase in the price of diesel and petrol has led to the rise in transportation costs. The increase in the transportation costs has to some extent helped the price hike of rice.

Sixth, the wholesale traders who bring rice from the northern region, the main rice producing area of the country, for marketing it in the capital and other areas, are subjected to extortion on the highways. This is also the case with the importers of rice from India. A report published in The Bangladesh Observer of July shows that importers have to pay Tk 700 to 800 on an average to highway police for importing a truck of rice from India to Dhaka through Sona Masjid.

Last but not the least, the big landlords are expecting another jump in the price of rice in September-October. So they are not going for large-scale sale of their rice at the moment. The big businessmen are also reportedly hoarding rice in anticipation of a further rise in the price of rice.

Now let us see as to why the rising price of rice is a cause for concern.

Firstly, rice is the staple food of Bangladesh. Rice provides about 93 percent of the country's total cereal intake and more than 70 percent of calories in the Bangladesh diet come from rice.

Secondly, in 2000, absolute poverty and hard-core poverty stood at 44.3 percent and 20 percent respectively. Researchers have found that even when the price of rice is stable, more than 50 percent of the income of the poor is spent on rice. Rice costs around 33 percent of the income of the lower middle class. The price of rice is the most important determinant of access to food in the poor households, as rice is their staple food. The higher the price of rice the less is their access to food.

Thirdly, in our male dominated society, women and children in the poor households have less access to food compared to adult males. The situation worsens when the price of rice spirals. In the absence of necessary intake of calories, women and children in poor households suffer most. For example, under-five mortality rate is 102 and maternal mortality rate is 4.3 per 1000 live births. Incidence of low birth-weight is estimated at 30 percent to 50 percent. Apart from loss of lives, there is a heavy loss in work output associated with malnutrition.

Fourthly, the government claims that prices of essentials are within the reach of the people as their income has also gone up. Let us see as to what extent the income of the poor who constitute about 50 percent of the population has really gone up. According to the Poverty Monitoring Survey Report (2004) of the Bangladesh Bureau of Statistics, in the six years up to 2004, average household income level for the poor decreased by 3.56 percent. According to another study, in 2004, 1.5 percent of Bangladesh's national income went to the poorest 10 percent of the population, down from 1.7 percent in 1999. Against this backdrop, the poor are the worst sufferers of the price spiral of rice.

Fifthly, in fact, price hike of rice and other essentials has affected people of all strata of the society. At a roundtable held recently in Dhaka, it was revealed that "due to price hike of essentials, the quality of living standard has gone down. Food consumption has lowered by 10-18 percent, while people now have to spend more money to buy food, curtailing their expenditure on education, health, and housing."

Sixthly, the rise in the price of rice influences the price of the secondary cereal, wheat. Information available from the food and disaster management ministry reveals that during the last year, production of wheat in the country stood at 12 lakh tonnes only (as compared to the previous production record of about of 19 lakh tonnes). Consequently, flour is selling at Tk 18 or more a kg.

Lastly, the rise in the price of rice leads to migration of the rural poor to the towns and cities for their subsistence. The situation worsens especially during seasons of slack labour demand and high price of rice. The capital city Dhaka has to bear the main burden of this seasonal migration of the rural labour force.

To conclude, considering the importance of rice in our socio-economic life, production of rice and other food products should be heavily subsidised so that the producers can produce rice, vegetables, and other food products according to the nation's requirement at a lower cost and sell the same at lower prices. The United States and the European Union together spend roughly $300 billion in subsidies given to their farming sector every year. All necessary measures have to be taken so that the price of rice is within the means of the common people of the country.

M. Abdul Latif Mondal is a former Secretary, Ministry of Food.