POST TIME: 12 October, 2018 00:00 00 AM
Profiteers reaping the benefit of measures to help the farmers
Duty on rice often disservices the consumers and also does not benefit the paddy cultivators
Prof. Sarwar Md. Saifullah Khaled

Profiteers reaping the benefit of measures to help the farmers

Rice is a staple food for Bengalis since time immemorial. Of late wheat and maize are being cultivated and consumed to some extent by the people of the region but they are yet to take the place of rice as a daily staple food. So as it is always necessary to keep the price of rice to the reach of the common people likewise it is also necessary to ensure that the rice growers get the just price of it so that they may profitably continue to grow the staple food item. As a result we say that the intentions of the government to give price support to farmers by imposing duty on rice imports are undoubtedly good. But in fact these 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 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 of the country. 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 it is understandable that the purpose of the government 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 chow 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 days. It is partially 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 from the imposition of the twin duties while consumers are paying the price for the tax measure.

Incidentally, it is interesting to note that it is a repeat of the same measure 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. In recent days reports are rife on rice-price spirals. This time around, too, whether 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 indirect duty that harms the consumers instead of benefiting the growers. And rice import should be banned in the harvesting season. This will help the growers with small means that are compelled to sell the produce at the earliest opportunity. 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.

Experience shows that the rice duty often does disservice to the consuming public instead of benefiting the target group – the farmers – the paddy growers. Rice duty in fact helps the 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.  

The writer is a retired Professor of Economics, BCS General Education Cadre