Fixed price for agro-products: Good measure, but won’t ensure fair price

Recently, the Department of Agricultural Marketing (DAM) announced it is working to fix the prices of a few agricultural products to ensure farmers get a fair price at the market. DAM has reportedly found out that farmers are having a hard time getting fair prices despite a bountiful harvest this year. One of DAM's studies, conducted in 19 districts of the country, reveals that the farmers are being forced to sell onions at Tk20-21 per kilogramme, whereas the production cost is around Tk19.24 per kilogramme! 

According to Director General Mohammad Yusuf, the Department of Agricultural Marketing is working to fix the prices of 16 agricultural products – which include: onion, garlic, mustard, lentil, cauliflower, cabbage, cucumber, tomato, green papaya, okra, bean, eggplant, green pepper, gourd, Aman paddy, and Aman rice – to help the farmers as well as consumers.

This decision, while looks like a good measure, cannot contribute much to ensuring fair pricing at agricultural markets. The government is unable to control the prices simply because it does not have the necessary infrastructure or legislation to help achieve such a feat. And, then there is the case of supply and demand. You cannot simply determine the price of a product without taking supply and demand into consideration.

For example, if wholesale buyers offer farmers Tk10 for a kilogramme of a product in a good harvest year simply because there is no shortage of it, farmers cannot bargain for Tk15. And since most of the agricultural products are perishable goods and cannot be stored, the farmers are forced to sell them at whatever price the wholesale buyers are providing. A fixed price at the retail or wholesale level might just force the wholesale buyers to stop buying or increase the price for the consumers. It therefore might destabilise the market instead of stabilise it.

Then there is the matter of transport costs. A product transported from Narsingdi to Dhaka will naturally have a lower transportation cost than one transported from Satkhira. These things need to be taken into account while determining the cost of any product. 

These, along with many other reasons, point towards the fact that government interventions to fix prices of agricultural products could be incredibly hard to implement – which is already evident from the failed attempts to fix prices of paddy in past years.

Policies generated from discussions among the stakeholders are what Bangladesh needs. The government must sit down with farmers, wholesalers and retailers to get to the bottom of the problems they are facing. Without their involvement in policy making, fixing prices of agro-products will not be much more than a political stunt.

Ensuring proper infrastructure facilities, transportation and storage should be a priority – to create a dynamic and stable market which would help the farmers as well as the consumers to buy and sell agricultural products at fair prices. Advantages of modern technology should also be availed in this regard.

Since Bangladesh produces a wide variety of agricultural products – including many types of vegetables – and consumers generally like them to be fresh rather than cold or processed, it is all the more challenging for us to ensure a stable agricultural market. During my stays abroad – in countries like England, Germany and New Zealand – I have not found anything similar to the Bangladeshi agricultural market, which is why we require unique solutions to our problems as these problems are themselves unique and cannot be compared with the situations of other countries.

Therefore, unless a clear policy that goes to the heart of the problem is implemented taking into account the concerns of farmers and others involved, we will not be able to stabilise the market.

Apart from this, proper access to information should also be regarded as a very significant part of any solution to the problem of unfair pricing. One of the most important things that economics teaches us is that sellers must always be aware of the current condition of the market as in current prices or demands of any given products. Barring that, sellers cannot get a good deal on the market.

Though at present times, farmers and other stakeholders can get information online, the government could take initiatives to introduce programs that would make the people concerned better informed. Radio and television channels, as well as online portals, can play vital roles in this regard to help farmers.

All these things should be taken into account before we formulate a long term solution to the problem of unfair pricing at agricultural markets. Considering how this problem has been hurting farmers as well as consumers for decades, it is high time we take some decisive and effective measures to solve it. 

Dr. Asaduzzaman, Former research director, BIDS

Dr.  Asaduzzaman , Former research director, Bangladesh Institute of Development Studies