Normalizing rice price

Rice prices have surpassed all previous records of going up in Bangladesh recently . Rice eaters cannot recall another time when prices of rice of all kinds from the finer varieties consumed by wealthy people to coarse ones bought by common people, shot up so high as they have during this period.
Understandably, the price of rice has become the centre point of national concern. This is specially because a large partof the population of Bangladesh are considered as poor and the price of rice which is the staple food for them, remains always a serious issue in their life. The poor in Bangladesh have been going through hard times. The economy has remained under a stress all throughout last year with income and employment opportunities on the down side. Lack of new investment operations and even reduction of production in existing enterprises meant shrinking of employment and income for the poor. Purchasing power of the poor was also eroded by the inflationary spirals. The on going flood and the ones before led to further erosion in the purchasing power for a great many number of the poor. Thus, in this backdrop, the need to buy the basic food for survival by them at very high prices, comes like an unbearable shocker.
The under production of the major rice crop of the year, the aman rice, from flood created grounds for fearing a supply side problem of rice. Local production in a normal year nearly meets the demand for rice in the country and a small quantity is imported. This time after the harvest of aman rice, the yields were thought to be not enough and a big shortfall was discussed specially for the loss of the crop in haor areas. For a while, the shortfall in rice production was speculated to be some 3 million tons . Later, this estimate of loss was scaled down after a soberer and realistic governmental assessment. This estimate mentioned a shortfall of about 1.5 million tons that would be met by imports. Thus, it was not a grim situation of extensive crop loss throughout the country causing drastic non availability or scarcity of rice leading to the shooting of its prices.
The population of Bangladesh is 90 per cent non urban and belong to the farming classes. The greatest number of them are subsistence farmers and the greater number of them could successfully harvest aman rice. The rest of the big farmers who also produce for selling in the market, only a part of them were affected by floods. They, too, could successfully harvest aman rice and their surpluses have been marketed or can be marketed. Therefore, it is not a case like Ethiopia and Somalia where no food was grown and famine and soaring prices resulted. Notwithstanding a somewhat bigger than the usual shortfall, ample stocks of rice are there in Bangladesh that would be normally expected to work against the raising of its price spectacularly.
So what has been happening to give a sudden spur to rice prices ? Clearly, the prices started accelerating unusually right after speculation in the media about production shortfalls. The chance seeking operators in the rice trade lost not a moment in making the most of this rather misleading information. Thus, rice stocked with them for long and bought at significantly lower prices, suddenly for such rice the traders all on a sudden started demanding a higher price. Per kg value of rice increased by Taka 5 or 6 within a day when, normally, such rises by Taka one or two creep up over weeks and sometimes months. The price of a certain variety of rice which was Taka 35 per kg in the morning sold for Taka 40 in the evening. Panic buying on a large scale following restlessness in the markets following media speculation further fuelled this senseless price rise.
Thus, the latest sorry developments in the rice market can be traced to irresponsible observations that worked as a trigger and the rice sellers exploited it to the hilt to squeeze out as much as possible from the consumers in a spree of sheer profiteering delight. This rip-off of the rice buyers has no logical or economic basis like scarcity of a commodity inducing the rise in its price. There is ample rice in the country. It is now largely an artificial crisis of rice that has been allowed to bloom on the basis of a rather carefree comments by ones who should have been more guarded or cautious because of the express reason that any loose statement would be wrongly exploited.
Certainly, there are other factors also that contributed to the rice price escalation such as the low stocks with the government, the slow pace of rice imports and the government not yet seen to be taking forthright measures to build up stocks formidably and quickly. These factors have been the reasons for the slow but steady rise in the price of rice in the markets. But the sudden big boost in rice prices was seen clearly linked to chance seeking profiteering instincts..
The damage has been done and government must get down to repairing it at the soonest. It is heartening that government has reassessed the situation quickly after the fatal remarks that sparked the crisis. Government is planning to start on its own open market sale (OMS) of rice imminently at prices well below the prevailing market prices. As soon as these OMS points will be activated, the same could put a pressure on the traditional rice markets to lower rice prices. But for this to happen, numerous OMS outlets must be opened all over the country to create a network of rice sale or distribution big enough to be an effective parallel system to the traditional rice markets. After this parallel system has been set up, it will be necessary to maintain it for a period at least till the operators in the traditional markets are forced to lower or normalize rice prices. At the same time, government will have to be seen as already engaged in large scale imports of rice and also receiving rice in similar quantities as food aid from the donors. This vision of the government bringing sufficient quantities of rice into the country without a pause, will encourage the traditional operators in the rice market to lower or stabilize prices as a way of successfully disposing off their stocks in the face of competition
Government will also have to decide that it would continue its activities of selling rice at much subsidized prices to the poor till at least the next rice crop is well harvested. Government should be also prepared to launch and sustain a free distribution programme of rice among extremely distressed people for a period long into the present year till they have got back considerably their purchasing power and actual produce from the land.