Dhaka consumers pay up to 404% more for rice than production cost: DCCI

Dhaka consumers pay 404% more for one kilogram of fine rice and 260% more for coarse rice compared to the producer-level prices, finds a study conducted by the Dhaka Chamber of Commerce and Industry (DCCI). 

The prices of several agricultural products, including rice, onions, potatoes, garlic, and turmeric, rise abnormally at the retail level in Dhaka as they pass through the hands of producers, wholesalers, and retailers, shows the study.

The results of the study titled "Food inflation: An analysis on price dynamics of essential commodities" were presented at an event organised by the Dhaka chamber in the capital's Motijheel today (17 October). The research was presented by AKM Asaduzzaman Patwary, executive secretary (R&D) of DCCI. 

The study, which was primarily conducted to investigate the reasons behind the food inflation rate surpassing 14% in July, shows the price of one kilogram of locally produced onions is 365.12% higher than the production cost.

Similarly, the price of ginger increases by 332%, potatoes by 190%, salt by 200%, turmeric by 316%, and dried chilli by 110%, it shows.

"Although prices increase from producers to consumers, producers often do not receive a fair price."

Ashraf Ahmed, president, DCCI

Among these, the lowest price increase has been observed in beef, where the price rises by 5.71%.

The production cost of one kilogram of coarse rice has been found at Tk16.67 (an average of the minimum and maximum prices obtained from the field). The producers sell it for Tk23.75, which includes their profit and associated costs, reflecting a price increase of 42.50%. 

The wholesalers, after adding transportation, labour, storage, and other related costs, set the buying price at Tk26.25, where the increase is 10.53%. The wholesalers then sell the rice to the retailer at Tk50, marking another significant price hike of 90.48%. 

The retailers set the purchase price at Tk56, where the price increases by 12%, and with an additional 7.14% profit, the rice is sold at Tk60. Throughout the entire process, despite a total price increase of 260%, it is the wholesalers who are found to have contributed significantly to the abnormal price hike.

In the case of fine rice, even more alarming data has been revealed. After purchasing the product, the wholesalers make up to 220% profit on the price at which they sell it.

It has been found that for nine imported products — soybean oil, wheat, onion, ginger, garlic, lentils, sugar, milk powder, and red chilli — the price increase from production to retail level ranged between 1.69% and 32.99%. The highest price increase has been observed in wheat, at 32.99%, while the lowest is in milk powder, at 1.69%.

Asaduzzaman Patwary, DCCI executive secretary, said the primary reason for the current food inflation is the lack of coordination between the demand, production, and import of essential commodities.

He said that the increase in commodity prices is driven by several factors, including rising production costs, limited supply, inefficient market systems, high transportation costs, and market dominance with limited bargaining power.

Additionally, factors such as artificial shortages, difficulties in opening letters of credit (LCs), seasonal price fluctuations, currency devaluation, inefficiencies in the supply chain, inadequate storage facilities, and limited market access for producers have also been found to have contributed to price volatility.

The research was conducted on 20-29 August across 49 districts in 8 divisions of the country, collecting data from 600 respondents, including producers, importers, wholesalers, and retailers. The study gathered information on 21 food items, of which 12 are locally produced, 5 are imported, and the remaining 4 are both locally produced and imported. Samples were collected from producers, importers, wholesalers, and retailers at various stages during the research.

Ashraf Ahmed, president of DCCI, said although prices increase from producers to consumers, producers often do not receive a fair price. "Sometimes, indirect costs are involved in raising prices. There should be initiatives to utilise satellite technology to assess agricultural production."

He went on to say, "If we can reduce production costs at the storage, transportation, and processing stages, prices will comparatively decrease. Additionally, by reducing post-harvest losses through processing, it is possible to significantly lower costs for perishable products."

The Dhaka chamber president said it is essential to emphasise the importance of obtaining supply and demand-based information, analysing data, and evaluating it. A tariff calendar could be developed to regulate commodity prices in the market, which would outline when tariffs will be imposed on imports and when they will be reduced, allowing for advance decision-making, he said.