A raw deal, through and through

Tanim Ahmed*, NewAge, April 30, 2009

Since the government’s estimation of production costs and fixing the procurement price does not involve farmers’ representatives or accommodate their opinions, it is natural that their interests would not be reflected fully.

IT IS the same story almost everywhere. The only variables appear to be the names and places. The trend, according to farmers’ accounts, has hardly changed over time. In a nutshell, they hardly benefit from the government’s procurement drive or the price that is fixed for government procurement. They agree that such a price acts as an indicator for the market but it is just that — an indicator. It does not necessarily mean that farmers will get that price in the open market.

Besides, government procurement is not of such scale that it would make tangible dent with only 12 lakh tonnes against 15 times that much in total production for the boro season. According to reports, the government plans to procure rice at Tk 22 per kilogram and paddy at Tk 14 per kilogram. Estimates by the Department of Agricultural Extension show that paddy production cost per kilogram was around Tk 8.5 offering almost 65 per cent profit, which should be considered reasonable.

As it turns out, this calculation of profit is only an oversimplification of the complexities involved. The production cost of paddy is estimated based on official data and figures. For instance, although farmers often have to buy fertilisers from the black market with a premium and end up paying double, sometimes triple, agriculture department’s estimates do not account for that. It is often the case that farmers are denied their full requirement of fertilisers through official channels and have to resort to the black market, which again thrives because of pilferage from government stocks and unscrupulous fertiliser dealers. It is also often the case that farmers end up using more fertiliser than the agriculture department’s official estimation for a host of reasons.

Labour and irrigation cost quite naturally vary but the estimates are typically found to be lower than the actual costs on the field. One reason for this gap between the field reality and the agriculture department’s exercise on paper is that the entire process does not include farmers or their representatives at any stage of the exercise. They are consulted neither by the agriculture department nor by the government when fixing a procurement price.

There are further problems with the procurement drive because the bulk of government purchase, almost 10 lakh tonnes will be rice and not paddy that the farmers might be able to sell directly. When the government buys rice, it is the millers who get the benefit and their price that is established where it would be officially presumed that the farmers received the government’s procurement price, which the government apparently considers a ‘minimum support price’ that is in vogue in many other countries including India. However, the market prices are often decided by the large millers and wholesalers where farmers are often heavily undercut when they sell their produce. They seldom get a price that is even close to the government fixed price or make sufficient profits to see them off comfortably till the next harvest.

One must work backwards from the government fixed procurement price for rice to arrive at the realistic market price for paddy. In other words, regardless of the government’s procurement price for paddy, the fixed rate of Tk 22 for rice would determine the true market rate for paddy. Generally, a maund (37.3kg) of paddy yields around 25kg of rice. At the fixed rate of Tk 22 per kg then 25kgs would be Tk 550. This price would have to include the millers’ overhead and profits as well. But even without accounting for that, price of each kilogram of paddy comes to about Tk 15, which is just one taka above the government procurement price. But according to reports in newspapers and claims made by farmers they have had to sell their boro paddy for even Tk 300 per maund.

Farmers from different parts of the country would also point out that they have paid far higher prices for fertilisers than the government rates, that their expenditure on labour is also far higher than the government’s estimates of about 40 man days of labour for one acre (100 decimals) at a cost of Tk 120 per man-day. According to farmers, however, boro cultivation on 1 bigha (33 decimals) requires at least 20 man-days with a unit cost of Tk 150. Their cost of irrigation, especially diesel-run irrigation, is also much higher than the agriculture department’s estimated Tk 3,000 per acre.

These anomalies in estimation of the paddy production cost leading to a procurement price are only part of the problem though. The farmers, especially small and marginal farmer, across the country would readily admit that they do not even attempt to sell paddy when the government procurement drive is going on. And their recent experience from the short wheat procurement drive would further add to the deterring factors. Even according to officials of the agriculture department, only party cadres or those considered Awami League supporters were given priority and most of the people who could manage to sell wheat were party faithfuls.

There is no guarantee that it would be different for boro paddy. To make things worse, officials involved in the procurement drive enforce stringent regulations for the paddy to qualify for government purchase. It is often the case that farmers are told that the paddy has far too much moisture than the stipulated level. Some are told that the quality of paddy is simply not good enough. In such cases the farmers find it more convenient to sell of the paddy at the nearby market for whatever price they get and return to their villages. They point out that the next day that same paddy will end up in government warehouse when it goes through different parties who have a better ‘understanding’ with the procurement officials.

Since the government’s estimation of production costs and fixing the procurement price does not involve farmers’ representatives or accommodate their opinions, it is natural that their interests would not be reflected fully. It is something that needs a sustained campaign from the citizens as well as the political parties for the government to acknowledge and accommodate. What can be done, however, is that the procurement drives will have to be made through mobile units that are more accessible to farmers. Additionally, this procurement drive will have to be run in such manner that it works in a similar manner as the open market where the farmers do not face too many hassles.

Although the government’s fixed prices work out well on paper, it appears that the procurement price has been fixed not so much for farmers’ interests as it was for consumers’ interests. In fact, that has been one of the main agendas of successive governments—to keep rice prices down for the urban middle class. While cheap rice at city markets would certainly be appreciated by the affluent and the more influential urban middle class, it would fail to sustain the vast majority of rural poor. Farmers are already feeling rather discouraged to plant paddy for the next few season except for what they might need. It is also unlikely that a flawed approach would spell doom for the government or for the country’s food security. But it would certainly add to the resentment of a large number of farmers. And they would not be a long way off thinking that the government values their urban counterparts much more than them.


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