Widen The Food Security Program

Hungry people rally behind the queue, Leaving the government with ideas few How to fix the food security To help the ones most needy It is likely the crisis will brew.

As commodity prices soar,a record in decades,sufferings and ordeals of ordinary people get worsened.More and more people struggle to queue behind govt ration.So far it is not clear how many managed to get a free ration card. But it appears govt has to widen its ongoing social security programs in order to accommodate more and more people in distress.

Government food security programs include Open Market Sale(OMS),Money for Work,Vulnerable Group Feeding (VGD),Govt Relief,and Employment Generation Program for Ultra Poor. March of hungry people left no choice but to widen the ongoing programs. In 2017-18,Tk 9470 crores were spent on various food security programs. A year later,in 2018-19,Tk 10457 crores were spent on such programs. In 2018-19, 12.1 million people were subject to OMS programs,costing govt TK 832 crores. Government allotted TK 1085.07 crores for VGD programs,1730.81 crores for VGF and TK 1650 crores for employment for ultra poor in 2018-19(Source: BER 2019).This year govt planned to feed 10 million poor households. Family card has been distributed by govt in this regard.A budget of Tk 5280 crores are also allotted. Card holder can avail maximum of 2 litres of soybean oil,2 Kgs of lentil,1 kg of sugar and 2 kgs of onion(Source: The Business Standard,October 22,2022).

When we were kids ,we used to see scenes like people waiting in queue for hours for flour,sugar and oil. Things have improved. But family card concept is invoking that old memories of bygone era. This is an indication how worst the hunger situation has become. In Global Hunger Index,Bangladesh’s position slipped to 84 from 76 out of 121 countries. Clearly, our vulnerability in ensuring food still prevails. Any volatility in oil and grain markets hits us hard.

This is government initiative. But any private initiative/effort is hard to find. In our neighboring cities like Kolkata,Jaipur,Lahore,Delhi,Karachi we see lots of private langars/ charities to feed the vulnerable or the hungry. Such community-led effort is needed here. We simply cannot let millions of people starve indefinitely. Platforms of businessmen and other professional bodies should step in to chalk out how to coordinate such charities across the country/ at least in key poverty pockets in some urban areas. This solidarity will only improve their public image.

Our cities by any standard do not qualify for a proper city. Even the Mughals installed resting places,water tanks,shower rooms for travellers who would make a brief stopover. Some of them were free. Even the concept of langars,which is pretty common in the subcontinent, is conspicuously absent here. To qualify for a proper city, Bangladeshi cities should build such urban facilities(We do not have proper public toilet and cheap taxi service)so that most of the city dwellers/ travellers can avail them.

As crisis knocks on our doors,we have to prove that we are better than the Mughals by starting some free langars across the city. Our development story will mock us if a single life is lost in the looming crisis.

Could There Be A Wage Hike?

A sudden fuel price hike, Hurting the rich and poor alike. Protein bank and rise in deposit rate In this crisis,few means great.

In an unprecedented move, government more than doubled the energy prices¹. This sudden hike in energy prices caused ordeals to the vernacular lives of ordinary people. Ultimately, the rise in energy prices will drive the prices of everything, causing further woes to the inflation battered middle and lower income groups.

This rise has coincided with the ongoing negotiations with the IMF for a credit of $4.5 billion budget assistance, which government desperately needs to check the record current account deficit. Despite the claim that no string attached with the IMF credit package, many see the rise as part of the negotiations. Concerned ministry claimed the step was a must to put an end to the oil and diesel smuggling as a huge price mismatches prevailed prior to the price hike. In addition, BPC was incurring a record deficit of $2 billion. Experts and NGOs however argued that government could have avoided the price hike by wavering some of the taxes on fuel. In addition, they also demanded information about the saved subsidy to BPC, some estimates put the figure somewhere around Tk 460 billion ,in the last couple of years when oil price was below $70 / barrel. This salvaged subsidy could have used to prevent the hike, they further argued.

Govt is also mulling raising the price of tap water by 25%. Earlier govt raised price of urea to Tk 16 per kilo. This thickens the belief that govt is determined to reduce subsidy expenditure, I think it is good,in a bid to unhook the IMF credit. What I construed from the energy price hike is that government may use the IMF credit to check the budget deficit while it may continue development expenditure as planned ahead of election years to procure loyalty. This may be the reason behind its pass of fuel price hike to the consumers.

There is a perception that the rise in fuel price will further aggravate the inflation problem. Growing price levels and Central Bank's gradualist policy to contain inflation will ultimately reduce the aggregate demand, leading to downward pressures in the price level. The unprecedented rise in fuel price will check the leakages in oil consumption in rental power plants, which enjoy many privileged benefits apart from subsidies in energy sector.

The fire tragedy in BM container depot exposed that goods are being exported to other countries concealing their true identity. Fertilizer and diesel subsidy may end up in wrong hands if the price mismatch between the domestic level and international market is huge.

Rising cost of living calls for an increase in pay hike across the sectors. Govt has already adopted a policy to review public service pay scale in every two years. Last year, govt also raised the minimum salary of the garments workers. But the inflationary pressure rendered useless the pay hike and to some cases conditions of the wage-earners deteriorated. Now here comes the point as government is letting the price fixed by the market then it should also include cost of living clause, which requires that salary reflect cost of living, in the job contracts. But that is not happening.

In the latest Monetary Policy Statement ,government clearly spelled that it would raise the policy rate by 50 point basis. This gradualist policy, small increase in interest rate at measured intervals, is anticipated to cut the money supply. But any government initiative to pay rise will increase money flow of the economy. Public service salary increase declaration will raise the salary level of the private sector. This increase in money supply to the economy is contradictory to the Central Bank's gradualist policy.

But people require urgent attention from the govt to lift them out of this ordeal. Protecting the badly affected groups should get the top most priority. Depreciation of Taka is the incentive to the exporter. At the same time, falling orders due to recession like situation in the West causes worries to them. But the workers vie for the benefits exporters received from the depreciation of Taka. As they are also having a tough time, a small increase in their salary will not be a big deal. At the same time, protein bank, discounted markets could be set up in industrial pockets to offer them discounted goods. Special deposit rates could be offered to lower income and vulnerable groups through commercial and MFS so that they could offset the inflationary pressure. This step is in line with the Central bank’s MPS. For long, Central Bank has barred both the deposit rate and lending rate from rising. Govt should discontinue it. Increasing the deposit rate is tantamount to give inflation-battered ordinary people an incentive, no matter how small it is.

In addition, special transport rebate, protein voucher could be introduced to fixed income groups as long as their salary is not adjusted to the inflation.

There is growing concern that this fuel price hike has seriously undermined the food security program. Leading agricultural economist calls for direct cash subsidy to pump owners as the decision will raise the irrigation cost by TK 13 billion². Govt could mull diesel rationing to diesel-intensive economic activities. Or govt could offer interest free credit to pump owners through specialized banks, reducing the possibility of misuse of fund.

Another thing that everyone has to be careful about is the unacceptable profiteering from the crisis. Fuel price hike should not be an excuse to hike the prices of goods at every level. In recent years ,law enforcement mechanism has been deteriorated to a great extent. We witnessed how some quarters pocketed windfall gains from volatile markets of rice,onion,soybean oil and e-commerce platforms. I learnt that at soybean oil industry wholesalers refused in unison to give receipt to the retail sellers . It is unthinkable how undocumented transaction was taken place in digital Bangladesh. A favorable political climate prevails here for the operations of these organized groups who would make money through shoddy dealings. Giving bank licenses and edible oil factories to security establishment neither prevent this unethical activities in economy (NPL keeps rising) nor protect the consumer interests.

I think govt should clearly demarcate a line about who should do business and who should not. Regulatory and enforcement bodies should not engage in any kind of moneymaking activities. It just spoils the whole system.

Govt should address the woes of middle and lower income groups caused by recent fuel price hike. Raising salaries of industrial workers and benefits offered in line with the MPS objectives should be given utmost priority. Similarly infrastructure projects that do not yield any revenue should be scrapped. Luckily import spending is slowing down as reflected in data furnished by Bangladesh Bank. Govt should come clean by initiating probe on the soybean oil market debacle and delay in providing quick stat on BPC spending and earnings as the BPC started automated payment system few years ago. Failure to do so will be a boon for leakages in public corporation and jeopardize all the reform work in subsidy and incentives. Government’s stated monetary policy is an obstacle to raising the salary in general. However, as soon as inflationary situation improves it should spare no time to review the salary policy in general.

Notes And References:

1. "Bangladesh Announces Fuel Price Jump,Stokes Inflation Fear”,Ruma Paul,Reuters,August 13,2022. For more read at https://www.reuters.com/markets/commodities/bangladesh-announces-fuel-prices-jump-stokes-inflation-fears-2022-08-06/
2. “Shechey Barti Diesel Khoroch,Khadya Nirapottar Ki Hobey(Extra Diesel Cost On Irrigation,Looming Shadow Over Food Security) “,M A Sattat Mondol,Former VC Bangladesh Agricultural University, Daily Prothom Alo(p-8),August 13,2022.

Rice Stock Woe

Low rice stock in disaster year
Causes concern and fear.

Recently a news report published on a leading daily laid bare holes in our food security. According to the report, government's stock of rice is lowest in 13 years. Government has stored only 311,000 tons of rice at a moment when it needs to provide support for COVID-19 stricken vulnerable population group (Source: Daily Prothom Alo, April 24,2021). What is interesting in that report is that government itself is failing to keep pace with its anticipated stock of rice. It planned to stock 1 million tons of rice in government storage facilities across the country. But it managed to store only 311,000 tons.

It is indeed interesting that just a year ago Bangladesh was ranked by third largest rice producing country in the world by an institution. There is indeed truth in it. This success is largely driven by Boro, which is our biggest crop. Currently Boro harvest is going on. Once it is done we will see slight improvement in government's storing of rice. In 2012, our total foodgrain production was 36.83 million tons of which Boro accounts 18.76 million tons. In 2019, total foodgrain production was 41.57 million tons of which Boro accounts for 19.62 million tons(Source: BER 2019). Boro's share in total food production is always more than 45%.

So when the Boro harvest will be completed, a definitive conclusion can be made on government's rice storage. How did we end up having lowest rice stock in a decade? Many will look for answer to this question as such a crisis was widely anticipated following twin blows from flood and cyclone Amphan a year ago.

Back in May last year, I wrote a titled "Agriculture Holds The Key" where I analyzed relationship between rice production and foodgrain import during disaster and normal years. I gathered data for import of foodgrain and rice production at home delving Bangladesh Economic Review 2018. The period under consideration was between 1996 and 2017. The model did not turn out to be significant at 5% level of significance. But it was significant at 10% level. But individual coefficients including dummy coefficient did not appear to be significant at 5% level of significance.

Though the data at hand did not lend evidence, there is no gainsaying that foodgrain import was higher during disaster years. For instance, in the flood year of 1999 we imported 5491 thousand metric ton of foodgrain. In 1998 we also witnessed a severe flood.In 2000, a calm year, we imported 2104 thousand metric ton of grain. In 2008, post Sidr year, we suffered from cyclone Reshmi and imported 3471 thousand metric ton of foodgrain. The point is if natural calamity damages our crop production, we rely heavily on foodgrain import. Some years remain as exception.

Last year was a disaster year. Even the government acknowledged that it would need more rice to sustain its social security effort next year. Government planned to import 2 million tons of rice this year, but it managed to import 1 million tons, as the news report revealed. The market price of coarse rice spiraled up and was between Tk 48 and Tk 50, sensing the lower rice stock of the government.

Government procurement of rice did not proceed as it was anticipated. Passing of blame has been going on. There is an urgent need to meet government's rice storage gap.

Another danger is with rise in price of rice the price of other substitute product is likely to rise. For instance, wheat price, which is also included in government's procurement list. In 2018-19, government set a procurement target of 728,000 metric tons of food grain. And government finally imported 267,000 tons of wheat of which 56,000 tons of rice and 211,000 tons of wheat (Source: BER 2019).

Last year a news broke out that wheat production would fall short. Key wheat producing countries even imposed ban on wheat export. However, later it turned out that wheat production was much better. As government engaged in negotiation with Russia on Covid vaccine, it should also start talks to secure import of a good amount of wheat, eschewing or compromising its ban on wheat export.

Meanwhile, Vietnam, Cambodia, Thailand and Myanmar have good storage of rice. Government should redouble its effort to import rice from these countries as soon as possible.

It is bizarre that while there has been grim forecast of major foodgrain production, we have started procurement of foodgrain with much delay.

Let us remain optimistic about the ongoing Boro harvest and hope that ongoing situation does not turn worse. The pandemic has already pushed million to grinding poverty and many are finding it hard to get 3-square meal per day. At this turbulent time government needs to ramp up its program to widen food security. Procuring a mix of vital staples and ensuring its just distribution should be the prime concern.

Grow Crops,Secure Future

Flood causes damage to crops,
Yet leaves a healing message.
Pandemic inflicts more shocks,
But does not leave a recovery passage.
Credit is a must for crop production,
Stop its misuse due to corruption.
Enough food ensures the strength grow more,
And helps winning friends in distant shore.

Coronavirus poses serious obstacle in production and harvest of staple food grain. It already cripples agricultural supply chain. A famine like situation looms large. Though authorities ruled out such an extreme possibility, their reassuring remarks did not find a convinced audience. In urban areas, hoarding fever continues unabated. Desperate people defied confinement measures and stood behind the long queue of fair-price-program, operated by Trade Corporation of Bangladesh.

In the face of soaring rice price, I did a little analysis on production of rice and its dependence on agricultural credit and chemical fertilizers. However, I included the credit and fertilizer on separate equations. And I included both only when I wanted to see their contribution in total production of rice. Data gleaned from Bangladesh Economic Review 2018.

Domestic production of rice means growing of three crops--- Aus, Aman, Boro--- round the year. Data from 1996 to 2017 were considered for current analysis. Following panel model was considered:

Prod_it = b_1i + b₂ Cred_it + e_it

Where Prod_it = production of ith kind of rice at t,
Cred_it= credit disbursement for the production of ith rice at t,
b_1i captures individual heterogeneity.

The issue of whether data would be pooled together with a common intercept or a regression function with dummy variable for individual intercept would be constructed was settled with the aid of F-test. F-test statistic for 2 and 62 degrees of freedom , 263.69, appeared to exceed the critical value, insinuating that different intercepts for different rice varieties.

However in estimating the fixed effect I relied on deviation from individual means. So my model looked like:

῀Prod _it = b῀Cred_it + ῀e_it

Where ῀Prod_it = Prod_it - ‾Prod_i
῀Cred_it = Cred_it - ‾Cred_i
‾Prod_i= mean production of variety i,
‾Cred_i = mean credit for variety i,
‾e_i = mean error for i.

Prior to deviation-from-mean panel model, I checked for autocorrelation for Aus, Aman, and Boro individually. For 20 observations and 1 explanatory variable, none of the crops exhibited any autocorrelation. (For Aus d= 1.411, for Aman d=1.54, for Boro d = 0.801) Having run individual regression, the resulting transformed regressions looked like:

῀Prod _Aust = 0.0345῀Cred_Aust + ῀e_Ausit
(t=4.649,p=0.00017) (F=21.62, p=0.00019)

῀Prod _Amant = 0.2267῀Cred_Amant + ῀e_Amant
(t=4.57, p= 0.00021) (F=20.88, p=0.00023)

῀Prod _Borot = 0.527῀Cred_Amant + ῀e_Amant
(t=8.267, p= 0.000) (F=68.35, p=0.000)

During the given period a Tk 1 crore increase in disbursement of agricultural credit led to increase in Boro production by 0.527 thousand metric ton. Meanwhile, a Tk 1 crore increase in disbursement of agricultural credit translated into increase in Aman production by 0.2267 thousand metric ton.

Later I turned to see what kind of impact disasters leaves for production of rice. Here I took into account natural calamities like flood and cyclone as they inflict severe damage to crop production during the time of their occurrences. A semilogarithmic dummy regression function was constructed and the result looked like this:

lnProd_t = 9.962 + 0.000034Cred_t - 0.0625D_t (t=242.47,p=0) (t=8.23,p=0.00) (t=-1.059, p=0.302) (F=36.11, p=0.00)

Where lnProd_t= natural log of total production of rice at t,

Cred_t = Credit disbursement at t,
D= 1 for flood/cyclone years,
=0 for calm years.

It appeared that dummy coefficient was not significant. If it were significant, we would say that rice production during flood years was 6.06% lower than that of calm years.

Then I probed on joint role of credit and fertilizer on rice production. The resulting function looked like this:

lnProd_t= 8.459 + 0.2445lnred_t- 0.0454 lnChem_t (t=9.771, p=0.00) (t=8.04,p=0.00) (t=-0.346, p=0.732) (F= 94.23, p=0.00)

Where lnProd_t= log natural of total rice production at t,
lnCred_t = log natural of credit disbursement at t,
lnChem_t= log natural of chemical fertilizer at t.
Here coefficient of natural log of chemical fertilizer did not turn out to be significant. Model fit well. We could say a 1% increase in credit disbursement led to 0.244% rise in rice production in the given period.

Crux of the matter is disbursement of credit is vital for crop production. Disaster year presses for renewed effort and commitment in this regard. Disaster like flood often leaves some healing messages for agriculture. For instance, silt deposited along with other agricultural inputs could boost rice production in post flood years. This time we could be deprived of that as damages spring from both pandemic and lockdowns. Silver lining is that oil price is all time low and it means that irrigation cost and fertilizer production cost will be much lower than anyone can anticipate. We have to devise policies to grow more food grain to cater to the demand of people. There is evidence that past pandemic left active population severely weak. And weak population cannot fully contribute to post disaster period.

The post-pandemic world will be hungrier than ever before. Food will play a decisive role in shaping bilateral and strategic relations. We have to grow enough food so that we can win friend and allies in Africa and Asia and secure our economic interests. So we have to grow more food not just for us but for friends in near and far away continents. For that, agricultural credit should be easier to access and hassle-free. And we have to make sure that it falls into the right hands.

Key takeaway of this analysis is that this pandemic may inflict damages to crop production that may not be seen in other disaster years. Agricultural credit is quintessential to grow more crops and requires govt’s policy support. Growing enough food has also strategic benefits. While assessing policies in the time of pandemic, our policy makers should contemplate this uncharted course of food security.