POST TIME: 20 August, 2018 10:28:07 AM
Profiteers jacking up rice prices
Rice duty helps profiteers pocket windfall profits, farmers hardly benefit by it and consumers decry price hike
Prof. Sarwar Md. Saifullah Khaled

Profiteers jacking up rice prices

Rice is a staple food of the Bangladeshi people. As a result everyone aspires that government will keep the price of the staple at a level so that they can buy it at a price convenient for them. At the same time it is also desirable that the government will ensure the situation so that the rice growers get the just price to continue to grow the staple. From this point of view the intentions of the government to give price support to farmers by imposing duty on rice imports are undoubtedly laudable. But in fact such measures are doing a disservice to the people due to the jacking up of rice prices by profiteers. This year the prices of the staple food item were originally high on the market even in the harvest time. But at the growers' level the paddy prices were not that much high. However, the millers and hoarders were blamed for rice market manipulation in their favour. Now as the government in the new budget 2018-2019 imposed 28 percent duties on rice the operators in the oligopoly got a pretext for price rises.
The avowed purpose of imposing the duty was to give price support to the paddy growers. The duty was intended so that the traders could not knock down rice prices through a glut of import at the prime time. The Finance Minister said in his budget speech that "This year we have a bumper production in rice, thus to protect local farmers, 25 percent customs duty and 3 percent regulatory duty has been re-imposed on rice importation". So the purpose was honest. But local sources said that the farmers mostly had run out of their harvested rice stocks by the time when the government decision came into effect. By then paddy has been turned into rice and stocked in the storages of millers and traders. And they are happily milking the cow in the middle of the tenuous rice market chain.

It was observed during a market survey that rice prices had increased by around Tk 200 per 50-kg sack in the last few weeks. It is true that there are adverse effects of monsoon rains on the rice market. However, that is not the main factor in operation. The fact is that there is a lot of supply of rice in the market. And there will be in sight lots of rice stacks in wholesale shops if one takes a ride along the Baddha road. The middlemen in the rice market are reaping the benefit of the twofold duties – customs duty (CD) and regulatory duty (RD). Many analysts are of the view that the farmers are getting little benefit while consumers paying the price for the tax measure.

Incidentally, it is interesting to note that it is a repeat of the same measure and the experience of the imposition of the same amount of the same twin duties on rice last year 2017.

The tax incidence on import of rice was 28 percent, including 25 percent customs duty and 3.0 percent regulatory duty. Then also, to ensure fair prices to the local growers the government had imposed the high import duty on rice. But the resulting substantial hike in rice prices at the consumer level due to well intended duty prompted duty cutbacks. The customs wing lowered the 25 per cent CD to 10 per cent on import of rice for domestic consumption. The Internal Resources Division (IRD) issued a Statutory Regulatory Order (SRO) making the reduced duty effective from June 21, 2017. As the CD was reduced to 10 per cent, the RD was not applicable to the import of rice the consumers came to an ease. In recent days reports are rife on rice-price spirals. This time around, too, if there was any thinking in government circles, about remedial measures has yet to be known.

It is unjustified to repeat the same mistake time and again. If growers are to be benefited in the true sense of the term they may be directly helped through limiting the quantity of rice import to the amount to meet the deficit only instead of imposing import duty that raises price. And rice import should be banned in the harvesting season when there are enough paddies with the growers. This will help the growers with small means that are compelled to sell the produce at the earliest opportunity because of financial hard up.

      The government should refrain from imposing shiftable import duty in any form on the staple food, a commodity with inelastic demand, to fatten the public exchequer through a measure that usually feed the traders by coarsening both the growers and the consumers. The rice duty, as we have experienced, often does disservice to the public. Rice duty helps profiteers pocket windfall profits, farmers hardly benefit by it and consumers decry price hike. Henceforth the government should be alert so that the profiteers cannot be benefited in any way from measures taken to help or benefit the farmers and the consumers.  

 The writer is a retired Professor of Economics, BCS General

Education Cadre