“Rice price resolution”: Difficult but compulsory

“Rice price resolution”: Difficult but compulsory 27/07/2011 03:51:00 691

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“In the past time, the government has used quite a lot of financial means to support the farmers to ensure their profit in agricultural production. The amount of money used every year is rather huge. However, the situation is that the farmers still suffer when they can’t get direct profit from selling their products; there are many layers of intermediaries. To solve the rice problem is not easy now when the rice traders are controlling the price”, Mr. Nguyen Anh Tuan, Deputy Director of Price Control Department (MOF), said when discussing the solution to ensure profit for the famers in their agricultural production.


Recently, the increase of rice price is good news for farmers; but to best profit the farmers from selling price, there should be supporting policies from the government. In the role of policy makers, what has MOF done about this?


In the past time, on the basis of Decree 109/2010/ND-CP dated 4/11/2010 on rice exporting business, with two important regulations on defining the cost rice price and the floor rice price for exporting, MOF has issued two very important Circular to assure the farmers’  profit. 


The Joint Circular (MOF and Ministry of Agriculture and Rural Development) No. 171/2010/BTC-BNN&PTNT dated 1/11/2010 gave out instructions on how to survey and define the production cost, thus define the cost price for rice in a year. In this interministerial, the provincial authorities are responsible for collecting the information about costs as the basis for defining the sale rice price in the area; then report to MOF. MOF will generalize and announce the average rice price for each region. It also helps the rice traders, rice producers to ensure profit and the Vietnam Food Association to define and announce the export rice price at different time. 


In the middle of 6/2010, MOF issued Circular No. 89/2010/TT-BTC on how to define the export rice price. It should be done on the principles that it is suitable with the supply-demand relation, the domestic and world market situation and it can profit both the farmers and rice traders. Especially, in this circular, two approaches are used to define the floor price: expenditure and deduction in order to ensure the national rice production and the farmers’ profit. 


Although the government has had many incentives to stabilize the rice price, the rice traders are still buying rice as a speculation, manipulating the price; therefore, the farmers can’t really benefit what they should. In your opinion, what can the government do to prevent this? 


It is difficult. The reality is that the farmers can’t directly sell their products to the rice exporters, but the rice traders. Although the government has announced the farm gate prices, the Vietnam Food Association has committed to purchase the rice at high price, what the farmers really get is still something to discuss.


I also hope under the control of distribution channel, trading etc. the authorities are able to rearrange the system in a way that there are fewer intermediaries. The important thing here is the transparency of these traders, hence the farmers can profit. In theory, the farmers can make big profit with the price announced by the Vietnam Food Association; but in fact they can’t because the rice traders have manipulated the prices, and the government can’t stop them buying.


It is heard that MOF has proposed to establish the stabilization fund to orient the price define and stabilize the rice market. Is it a positive resolution to best benefit the farmers? 


The government has appreciated MOF’s proposal, and has assigned Ministry of Agriculture and Rural Development to build the project: Policies of State support to stabilize the rice market in Vietnam; and MOF will coordinate. To do it effectively, MOF considers the stabilization fund as a “valve” regulating the supplies and demands.


So, in which orientation is the project built? 


In Statement No. 52/TTr-BTC dated 26/4/2010, MOF presented several plans, among which is the establishment of the stabilization fund. But the most important thing is to support the farmers at the production input, so they are able to produce rice effectively: high productivity, best competitive price. However, there should be market assurance, so when the price changes, especially at the harvest time when the price is low, the stabilization fund can regulate the supplies and demands by letting the businesses buy rice from the farmers. There are two ways to form the fund source: the first is to extract profit from the rice exporters, the second is to extract an amount of money on each ton of export rice.


So, when is the fund in operation? 


The current policies are good now. And the proposal is just a standby solution. 


In the past, there were no rice price define and announcement, no instructions on defining floor price for export rice, rice price to ensure profit at different time in domestic and world markets. Thank to these policies, now, the rice price has been publicized. For rice export, there is the floor price. The most important thing now is to bring the real price closer to the farmers.


Thank you very much!