Govt ends food procurement as rice prices fall

The interim administration has ended the internal food procurement drive before the deadline expires on October 31 because of the fall in rice prices in local markets. The mill owners who got ‘incentive bonus’ by supplying rice to the government warehouses even at higher rates are the ones who have profited most, not the hard-working farmers who are the primary producers of rice.
The authorities signed fresh contracts with the mill owners, most in northern districts, for supply of 1,60,000 tonnes of rice within six days for Tk 28 per kilogram, with Tk 1.25 as incentive bonus, though retail prices in the local markets are now lower than the government’s procurement rate. This prompted the food ministry to issue an official order on Monday, asking the Food Directorate not to sign any more contracts with rice suppliers, said official sources.
‘We have ordered the authorities to end the food procurement drive as almost 83 per cent of the total target has already been achieved…Moreover, the rice prices have fallen in the local markets,’ food adviser AMM Shawkat Ali told New Age on Wednesday.
He said the government has already stocked 10,32,371 tonnes of rice, which is the highest in eight years, from the boro procurement drive.
The main objectives of the government’s move to build up the food stock were to have control over market prices and ensure food security.
The food ministry, through another order on Wednesday, set November 10 as the deadline for the mill owners to complete the supply of rice as per the contracts already signed with the government.
The adviser, however, forecast that the rice prices would not fall any further as the import of rice through the private channels has almost come to an end due to higher prices. ‘Moreover, the amount of food support from donor agencies has also fallen,’ he added.
Initially, the government reached agreements with 13,833 mills for supplying 10,17,000 tonnes of food-grains by August 31 this year.
On August 10 the government decided to give mill owners the incentive bonus of Tk 1.25 for each kilogram of rice to expedite the procurement drive as the latter threatened that they would not supply any more rice to the government because the market prices of rice were rising at that time.
‘We will have to spend an additional amount of around Tk 25 crore as incentive bonus for procuring around two lakh tonnes of rice through fresh contracts after August 10 as the market prices of rice fell later,’ said an official.
The government cancelled the licences of around 2,000 rice mills across the country for failing to supply rice as per the agreements, or for not being willing to sign supply contracts, according to official records.
The rice prices at the retailers’ level have now fallen to Tk 27/28 from Tk 30/31 in the northern districts from where the government procures 80 per cent of its total stock of rice and paddy.
Official procurement of boro rice began on April 16, 2008 with a target of 12 lakh tonnes of rice to build a buffer stock for ensuring the country’s food security. The procurement price for rice was set at Tk 28 per kg, up from Tk 18 the previous year. The government also set a target of procuring 3,00,000 tonnes of paddy from growers for Tk 18 and 50,000 tonnes of wheat for Tk 26 per kg.