March 30, 2008

Sending wrong signals

Bangladesh traditionally depends on India to import rice when there is a shortage in local production due to a bad harvest. This year the culprit was the cyclone Sidr and the floods. There was also a huge unofficial trade channel between the porous borders the scope of which is now limited because of the barbed wire border fencing by India. The smuggled goods evaded government duties and kept the price low.

The price of rice has soared in the past six months with an increase of upto 60%. This is probably the reality that Bangladesh is facing. India said it had a bad year too and are reluctant to export according to demand. After much drama the export price of the pledged government level exports were fixed at $430 per tonne.

And the final blow was Indian governments decision to hike rice export price at non governmental level to $1000 from $650. This is a ridiculous price as the international prices are much lower than that.

This will send a wrong signal to the market which will prompt stockists and brokers cashing in. Although the Bangladesh government says that it awaits bumper boro harvest in April when the prices will settle. But I doubt prices will not come down anytime soon because there are always a group of traders who exploits the uncertainties.

I think its time Bangladesh should look to import from other neighboring countries like Burma, Thailand or Vietnam. The dependency on one country will have many unwanted consequences. The poor people are the hardest hit as their staple food is rice. They are already mocking some senior government officials suggestion that people should start eating potato more instead of rice.


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