Presentation by A. Ahmed, P. Dorosh, R. Shah and R.K. Talukder Bangladesh Food Security Investment Forum 2010 27 May 2010, Dhaka, Bangladesh

1. INCOME GROWTH, SAFETY NETS, AND PUBLIC FOOD DISTRIBUTION BANGLADESH FOOD SECURITY INVESTMENT FORUM 2010 Akhter U. Ahmed, IFPRI Paul Dorosh, IFPRI QuaziShahabuddin, BIDS RuhulAminTalukder, MoF & DM 26-27 May 2010

3. Nevertheless, the government must provide emergency relief during periods of natural disasters, alleviate chronic food insecurity through targeted food distribution to the poor households, and take steps, when necessary, to stabilize prices.2

6. The PFDS also plays other key roles:provides price incentive to farmers for increased production through domestic procurement of rice and wheat. maintain security stock of foodgrains to meet emergencies. prevent excessive rise in prices to stabilize market prices 4

8. foodgrain procurement modalities

9. size of buffer stock

10. storage facilities

11. stock rotation

12. transit and storage losses5

14. However, setting a procurement price that sends adequate production signals to the farmers, while minimizing costs to the public exchequer is a real challenge.

15. Research indicates that it is easier to forecast the size of irrigated boro rice harvest and future prices than aman, which is grown during the monsoon season.6

17. The procurement price set for the boro harvest was excessively high in 3 out of 4 years during the late 1990s, resulting in extra costs to the government and windfall profits to those fortunate enough to sell at the procurement centres.7

19. The National Food Policy, 2006 recommended to maintain a public stock of 1.0 million ton of foodgrains. However, the official government target in late 2008 was to hold a stock of 1.5 million tons of rice and wheat.8

21. Although public warehouses have capacity to store 1.7 million tons, some of this is unusable so that effective government storage capacity is 1.5 million tons. This is adequate for minimum national security stock but not for additional stock to stabilize prices and if the government continues with the food-based safety net programmes.9

23. Management approach

24. Institutional approach10

26. Enhancing effectiveness of public procurement programme which is an integral part of public food management system has become imperative. The food crisis experienced in 2007/08 have strengthened the case of improved effectiveness of domestic procurement programme.11

28. Proper management of public stock is essential for improved effectiveness of the PFDS. The government has to maintain rolling stocks to cater to the “routine” needs of the PFDS including Safety Net Programmes and Open Market Sale (OMS), as well as minimum buffer stocks for emergency distribution in times of natural disasters.12

29. IV. Areas of Interventions and Investment Options (Contd.) While estimating the minimum buffer stocks for emergency distribution, due considerations should be given to climate change-induced greater intensity and frequency of natural disaster as well as growth in population which pose a major challenge for Bangladesh. This calls for careful planning and management of the amount of grains to stock and distribute, and for storage facilities to be established as well as for improved monitoring of existing storage quality. 13

32. According to a recent government decision, an additional storage of 0.58 million ton of foodgrains will be constructed by 201. In fact, from medium and long-term perspective, the government has undertaken projects to enhance the public storage capacity from 1.5 million tons to 2.2 million tons over the next 3-5 years and is planning to increase the storage capacity to about 3.0 million tons by 2020.15