Govt cuts OMS rice, wheat prices again

The government has slashed rice and wheat prices by 25 percent and 10 percent respectively for open market sales to clear a part of its large stocks.

The move is likely to cost the state up to Tk 350 crore and affect many farmers and millers as it will push the prices of the staple food items down in the market.

The price of rice for OMS has been revised down to Tk 15 a kilogram from Tk 20 earlier. For wheat flour, it will be Tk 17 a kg, down from Tk 19 earlier, Foiz Ahamed, director general of the Directorate General of Food, said yesterday.

"The new prices will be effective immediately.” 

This is the second time the government has cut prices in just four months amid slow sales.

From July 2015 to February this year, some 1,132 tonnes of rice and 1.19 lakh tonnes of wheat were sold through OMS, the food ministry's records show.

About 58,074 tonnes of rice and 1.58 lakh tonnes of wheat were sold, in the same period of the previous fiscal year.

Food officials said the price cut was necessary to trim down losses of the state as the quality of rice would deteriorate if these remained in warehouses.

On February 17, government stores had 14.83 lakh tonnes of grains including 11.09 lakh tonnes of rice, compared to a total cereal stock of 12.07 lakh tonnes a year ago.

The prices were cut to clear stocks so new purchases can be made in the upcoming boro season, Ahamed said.

"We want to incentivise farmers by beginning boro procurement in May.”

To support the price cuts, an additional Tk 300-350 crore may be needed in subsidies.

The amount of subsidy would be much higher if the rice rots in warehouses, the food ministry official said.

“The market price will slump if the government sells rice at this rate,” Layek Ali, general secretary of the Bangladesh Auto, Major and Husking Mills Association, told The Daily Star.

Millers who have stocks will incur losses, while farmers will have to sell their produce at lower rates. “Many millers would have to default on bank loans.”

The price of the Swarna variety of rice has fallen from Tk 650 per maund (about 40kg) to Tk 610 because of the speculation over price cuts by the government, Ali had said earlier.

However, there would be no impact on the market as a result of the price cut as only coarse rice would be sold through OMS, officials of the Directorate General of Food said.

“The main consumers of coarse rice are the poor and we do not deal in medium and fine quality rice, so there will be no impact on the market,” the food ministry official said.

The price of coarse rice was between Tk 32 and Tk 34 a kilogram last week, down 8.33 percent on the same day a year ago, according to Trading Corporation of Bangladesh.

Only the export of rice can allow farmers to get better prices, said Abdul Mannan, a farmer in Bagerhat, who had to sell his BR 23 paddy at Tk 520 a maund.