Govt to raise subsidy to lower coarse rice prices

The government plans to bring down the price of coarse rice and keep it affordable throughout the upcoming fiscal year, starting in July, in an effort to provide some relief to lower-income people who are grappling with rising inflation.

If the price of coarse rice exceeds Tk42 in Dhaka or Tk40 outside the capital after the boro paddy harvesting season, the government will expedite the supply of low-priced rice through open market sales (OMS), and the finance ministry will increase its allocation for food subsidies.

Officials at the finance and food ministries told The Business Standard that a coordination council meeting has decided to give additional funding for food subsidies. Then on 5 April, the Food Planning and Distribution Committee approved a plan to continue the OMS of rice and extend it if necessary.

They note that at the instructions of the prime minister, the Trading Corporation of Bangladesh (TCB) will provide one crore family cardholders with 10kg of rice at Tk15 per kg every month. It is expected to take about six months to supply rice, using smart cards. In the meantime, the government will continue to operate the OMS programme as a tool for intervening in the market price of rice.

Infograph: TBS

Business people are sceptical about the government's plan to keep the price of coarse rice below Tk40 in rural areas and Tk42 in the capital, pointing out that the government's announced procurement price during the boro season is Tk44. 

However, they also note that a good yield is expected this year, and that coarse rice could be available at the lowest price in the last few years if there is no hoarding.

Shahidur Rahman Patwari Mohan, vice president of the Bangladesh Auto Major Husking Mills Owners Association, stated that the price of rice will not be lower than the government's announced procurement price.

"The government's prices are in line with the market. However, if hoarders – other than farmers and millers – are prevented from stockpiling paddy or rice, prices will come down," he added. 

Data from the state-run TCB shows that on Wednesday, coarse rice varieties such as Swarna and China were selling for Tk46-50 per kg in the markets of the capital city.

The Department of Agricultural Marketing reported that in the markets of different districts, coarse rice has been selling for Tk45-48. Traders, on the other hand, claimed that at the district level, coarse rice is being sold for Tk42-Tk44.

If the price of coarse rice exceeds Tk40 in rural areas, the government plans to increase the supply of rice through OMS in order to bring the market price under control. 

However, if the price of coarse rice remains at Tk40 at the village level, the OMS programme will continue as normal. As part of the OMS programme, the government is currently selling coarse rice at Tk30 per kg.

Officials at the Finance Division have stated that even if there is an instruction from the government's higher level to halt OMS and distribute rice through cards, OMS activities cannot be stopped completely. It is the only available tool for the government to control the market price of rice. Additionally, during the paddy-rice harvesting season, warehouses are emptied by selling rice through OMS to urban people.

According to the officials, in the current financial year's budget, Tk6,000 crore was allocated for food subsidies. In the revised budget, an additional allocation of Tk812 crore has been made. And an allocation of Tk8,000 crore has been estimated for the next financial year.

"Food subsidies are determined on the basis of domestic rice production, market price conditions, and the extent of government intervention in the rice market. The amount of subsidy provided is a relative issue and varies accordingly," said an official at the finance ministry.

"For example, the government will have to increase the subsidy as it has decided to provide products at subsidised prices to one crore families through TCB after the announcement of the budget. The subsidy will increase further in line with the expansion of the programme and supply more rice in the final year of the current government's tenure," he added. 

The government provides affordable food through the Ministry of Food, Ministry of Disaster Management and Relief and Ministry of Commerce. Till April 20 of the current financial year, the Ministry of Food and the Ministry of Disaster Management and Relief have distributed 24,76,000 tonnes of food – rice and wheat - at affordable prices under various programmes. Besides, the commerce ministry has provided about 210,000 tonnes of food through the TCB. The TCB plans to supply 2.75 lakh tonnes of food in the current fiscal year.

 A senior official of the food ministry, requesting anonymity, told TBS that there is a policy decision at the top level of the government to increase food supply at affordable prices. For this reason, additional subsidy will be kept in the food sector in the next budget. 

But everything depends on the price of rice in the market. The government will not supply extra if coarse rice is priced at Tk40 per kg or below. However, if the price is more than Tk40, the supply will be increased and the price will be controlled.

The official said that affordable rice will be provided through cards in the future. For this, the Prime Minister's Office and the Cabinet Division are working. The Food Department will conduct OMS wherever necessary to maintain market stability and meet the needs of lower-income people.

The TCB Chairman, Brigadier General Md Ariful Hassan, told TBS that one crore beneficiary families of TCB will get rice supplied by the government at an affordable price. 

"A preliminary decision has been taken to give 10kg of rice per month at Tk15 per kg against each card. However, this rice supply will start after the launch of TCB's smart card. This may take up to six months," he added.

The government expects the production of 2.15 crore tonnes of rice in the current boro season as against 2.02 crore tonnes last year. This year the government's rice and wheat procurement target from domestic sources has also been increased. Besides, the government has increased the collection price of paddy and rice.

In the Food Planning and Procurement Committee meeting held on 5 April, it was decided to procure four lakh tonnes of paddy at Tk30 per kg and 12.5 lakh tonnes of parboiled rice at Tk44 per kg during this boro season. 

This time a target of one lakh tonnes of wheat has been set at Tk35 per kg. This collection drive will continue from 7 May to 31 August. Besides, there are initiatives to import from abroad. The main objective of government stockpile augmentation is to increase supply at affordable prices.