Supply uncertainty pushes up rice price

Prices of rice have once again begun to shoot up owing to a shortage in supply.  

A nexus between big rice mill owners and importers and hoarders is believed to be behind the making of the crisis.

The staple food has experienced a hike between Tk250 and Tk300 per sack weighing 50kg in prices over the last one week. Rice prices witnessed a record increase of up to Tk500 per 50-kg sack amid the pandemic last year.

Later, the staple grain market somewhat cooled down after the government allowed its private import, cutting duty on its imports to 25% from the existing 62.5% in December 2020. Duty was again slashed to 10% with no satisfactory impact on soaring rice prices, rice traders said.

According to the Directorate General of Food, on 6 and 10 January, the food ministry allowed 320 companies to import 6.76 lakh tonnes of rice in two phases.

However, only 1 lakh tonnes of rice have been imported in the last 25 days as importers are allowed to import a certain amount subject to approval by the food ministry – not at their own discretion.

A number of importers and millers have taken it as an opportunity to make quick bucks, leading to another rise in the prices of the staple, sources said.

Md Harun-ur-Rashid, deputy director (internal procurement) of the food directorate, told The Business Standard that the food directorate has so far imported about 1 lakh tonnes of rice, both publicly and privately. Some 177 companies have till now taken permission from the food ministry to import 6.76 lakh tonnes of rice.  The process is underway to import the amount of rice needed.

Rice prices declined slightly after its imports, he said, expressing the hoping that if imports increase further, prices will also come down.

Rice traders said despite the rice import, the market is heading towards volatility because of the price hike of rice in the world market coupled with an inadequate supply of paddy and rice at the domestic level.

Besides, the opportunities that the government has provided for the import of rice privately are limited to certain organisations, they added.

Shanto Dasgupta, a rice trader and former president of the Chattogram Rice Mill Owners' Association, said only the commerce ministry-permitted organisations are allowed to import rice. That is why rice has not yet been imported in the country as per demand. Traders complained that a syndicate of importers and big mill owners has increased rice prices.

Moreover, middlemen, who bought paddy at higher prices at the beginning of the Aman harvesting season, are not releasing their stocks because of falling rice prices, he added.

As a result, prices of rice have begun to rise again, the business leader thinks.

Traders said the Balam variety of parboiled rice imported from India now sells at Tk2,450 per sack, with a Tk150 increase over last week. Prices of Beti Atap (sun-dried) that came from the same country have risen to Tk2,000-Tk2,050 from Tk1,800-Tk1,850 when its import began.

Traders at Chaktai and Pahartali wholesale markets in the port city said in the wake of the government's decision to import rice in the first week of January, prices of parboiled Miniket rice in the country dropped by Tk200 to Tk2,350-Tk2,400. Besides, each sack of Swarna rice was on sale at Tk2,150 with a price drop of Tk150-Tk200, Guti-Swarna at Tk2,000 with a Tk100 price cut, and Jirashail at Tk2,850 after a Tk50 price drop.

However, prices of all these rice varieties went up by Tk250-Tk300 per sack again over the last week.

In mid-January, prices of sun-dried rice fell by up to Tk100 as a result of the import. But now, the prices have gone back to their previous levels.  At present, Beti Atap is being sold at Tk2,400-Tk2,700, Miniket Atap at Tk2,600-Tk2,700 and Paijam Atap at Tk2,200-2,400 at the wholesale markets.  

Prices of Chinigura rice have long remained static at Tk3,800-Tk4,700 per sack without any changes in its prices. Katari (parboiled) is being sold at Tk1,400 per 25-kg sack.

According to the Directorate General of Food, on 1 July 2019, the government had a food stock of 16.74 lakh tonnes, while the stock was 11.88 lakh tonnes in July 2020.

However, as of 25 January 2021, the government has a stock of 7.4 lakh tonnes of food grains. Of the amount, there are 5.48 lakh tonnes of rice and 1.56 lakh tonnes of wheat.

Apart from imports, the government has also continued its paddy and rice procurement drive. A total of 51,026 tonnes of paddy and rice have been collected as of 25 January this year during the ongoing Aman procurement drive that started on 7 November 2020. The government had a target of procuring 10 lakh tonnes of paddy and rice during the Aman season.

 According to industry insiders, food stocks in the country have declined. The internal procurement drive is also not going as per target.

Although the government has made the opportunity to import rice to address this crisis available, the import process has been suspended since January 13 because of complexity over the HS code, they added. ***