Buy paddy from farmers, not rice from millers

Through its food procurement efforts, the government intends to serve two purposes: 1) maintain a stock to ensure food security, and 2) provide the crop growers with price support.

Unfortunately, the price support it offered in Boro season last year benefited the rice millers and traders far more than the paddy growers.

Not that there is no remedy for this.

A study that government itself commissioned last year provided the solution and submitted the policy option to the line ministries -- Ministry of Food and Ministry of Agriculture -- last week, a timely intervention, considering the fact that the government’s food department has just gone to market to buy paddy and rice in the current Boro season.

It advises the government: buy paddy from farmers, not rice from the millers.

If last year’s procurement experience is something to go by, the government would do well to immediately act upon this study advice.

A whopping 98.66% farmers, who had to sell their paddy to middlemen, traders, millers and wholesalers, got an average price of Tk15 for each kilogram of the grain in last Boro season, which was Tk11 less than the floor price of Tk26 set by the government.

Only 1.34% of the farmers got the government-set price against their produce, as they were the only lucky ones who could sell paddy to the government’s food department.

By no means is this sustainable.

If rice farmers in Bangladesh don’t get a fair price for Boro, they can’t make much investment in subsequent important crops of the year -- summer vegetables, Aus and Aman paddy, maize, wheat, and potato.

It has a chain effect on overall productivity in farm sector.

The Washington-based International Food Policy Research Institute (IFPRI) carried out the study through its USAID-funded Policy Research and Strategy Support Program (PRSSP) in Bangladesh with the Ministry of Agriculture commissioning the task.

The study notes that each year the food department buys far more rice than paddy under its food procurement program.

While its purchase of paddy benefits only a small number of farmers, the lion's share of the government-provided price supports actually end up in the hands of rice millers and by default to traders and middlemen -- all of whom buy paddy from crash-crunched farmers very early in the season, convert the same into rice, and enjoy a hefty profit by selling the same to the food department.

The IFPRI-study shows how a neighbouring Indian state does the public procurement of grains most efficiently -- benefiting the rice growers not, the traders or millers.

Couple of days back, I talked to the lead author of the study Dr Akhter U Ahmed, who served the global food policy think-tank at its Washington DC headquarters for many years and is now heading the IFPRI country operation in Bangladesh.

I asked him what policy change will most help provide needed support to the large base of the country's farming community.

Dr Akhter, who has been assisted in this study, among others, by fellow IFPRI researcher M Mehrab Bakhtiar and deputy research director of the agriculture ministry’s Agricultural Policy Support Unit (APSU), Mohammad Mosihur Rahman, said the solution lies with the government’s "will power."

He suggests that if they (government agencies concerned) properly internalize the findings and essence of the study and take move in right direction -- a simple policy shift can make a big difference.

How they do it in West Bengal?

In West Bengal, the state government procures a quarter of the paddy the farmers grow in a year across all rice seasons.

In Bangladesh’s case the procurement volume is less than 10% of the total production.

Since 2016-17, the West Bengal state government has implemented an electronic paddy procurement (e-procurement) system.

From 2017-18 to 2019-20, farmers’ participation in the e-procurement system has increased five-fold, from 465,000 to 2.36 million farmers.

Overall, West Bengal’s paddy procurement was 22% and 24% of total production in 2017-18 and 2018-19, respectively.

Paddy is procured from farmers primarily through two approaches. Under the first approach, farmers bring paddy to centralized procurement centres (CPCs), where the Food and Supplies Department assigns one purchase officer and one disbursement officer who purchases paddy from farmers and records these sales in the e-procurement system.

Payments are made via account payee checks under the 'Dhan Din Cheque Nin' program on the same day of receipt of paddy from farmers.

Under the second approach, registered farmers’ cooperatives, self-help groups (SHG), or producers’ organizations, which have applied, been screened, and are registered with the District Food and Civil Supply Department, announce the paddy procurement date in advance in the locality and procure paddy from registered farmers.

The cooperatives then deliver the paddy to state government’s designated custom milled rice (CMR) agencies, which have agreements with select rice mills.

A designated government official certifies receipt of the paddy and farmers’ cooperatives update the sales information on the e-procurement system and notify all registered members about sales via SMS. The state government pays farmers' cooperatives and self-help groups.

In 2019-20, out of the state government’s 5.2 million metric tons target for paddy procurement, the selected state government-designated custom milled rice (CMR) agencies procured the most paddy (46%), followed by the state government-run CPCs (42%) and the Food Corporation of India (that is, the central government) (12%).

Are we moving in the right direction?

Right at the beginning of the Boro harvest season last year, Bangladesh’s food department announced procuring of only 150,000 tons of paddy from farmers but over one million tons of rice from millers.

Two months later, some time in June 2019, when farmers not getting fair prices caused a national outcry, the government reconsidered the paddy procurement volume and increased it from a paltry 150,000 tons to 400,000 tons.

A year later, as another Boro season comes, the government further increased the paddy procurement volume. This time it’s 800,000 tons.

Yet, still the procurement goes in rice’s favour as the government has decided to buy 1.15 million tons of rice from millers as against 800,000 tons of paddy from farmers.

Agriculture Minister Md Abdur Razzaque has said the government is moving in the direction of procuring more paddy directly from the farmers, thereby reaching the price befits to the growers.

Food Minister Sadhan Chandra Majumder, a seasoned rice miller himself, has been talking about introducing e-procurement of paddy in Bangladesh since last year. Unfortunately, this initiative again fell through the cracks at the last moment in this Boro season too.

Dr Akhter and his study states that buying more paddy by the government doesn’t mean millers will be the losers in any way.

As they explain, the food department here would definitely involve the rice millers in the process, like the state government in West Bengal does, even if all the paddy is bought directly from the farmers.

It would be a win-win situation for all.

This article was originally published in Dhaka Tribune on May 11, 2020.

Photo Credit: Md. Aminul Islam Khandaker, IFPRI-PRSSP