With National Elections Barely Two Months Away, Bangladesh Government Is on a High Alert at Rising Potato Prices

In Bangladesh, potato prices are making big news. For the first time in history, it has opened the import of potatoes from neighboring India. Until last week, potatoes sold at BDT 65-70 (USD 0.60-64) per kg in Dhaka's retail markets.

This record-breaking increase has left people experiencing poverty struggling to afford this staple food item. The shortage of potatoes in the market and high prices are all the more telling given that the government announced in March that the county had a surplus production.

High potato prices have a compelling political ramification as the national elections are scheduled for January 2024. The incumbent Awami League, with its leader Sheikh Hasina as the Prime Minister, has been in power since 2009. In recent months, opposition parties have intensified their demand for a fair election overseen by a national government with representation from all parties.

The high prices of potatoes can have an impact on voting trends. To tame the rising potato prices, the Bangladesh government has swiftly allowed potato imports from India's West Bengal, which once was part of the same land as Bangladesh before the partition in 1947 created Pakistan with what became Bangladesh in 1971 as part of it.

The homogeneity of the land and economic interdependence of the people can't be missed as India's West Bengal is facing a glut while Bangladesh has a scarcity! In about a week, over 1,000 tonnes of potatoes have been shipped from India to Bangladesh.

Despite being a significant potato exporter in the past, Bangladesh has now allowed imports to stabilize domestic prices that have been soaring recently. The government's decision to import potatoes aims to address the supply-demand gap and lower consumer prices. The arrival of Indian potato imports has already led to a drop in wholesale prices, providing some relief to consumers.

According to a report in The Financial Express, the Ministry of Commerce, Bangladesh, conducted a study of the potato supply situation in October and released its findings in the first week of November has uncovered a syndicate of cold-storage owners responsible for manipulating potato prices. The study revealed that a faulty system of slips or cards given to potato preservers by cold storage owners has played a crucial role in confusing government regulators about the ownership of the produce.

These slips or cards are issued without proper identification, making it difficult to trace the original owner of the potatoes. As a result, cold storage owners or traders easily evade regulators and manipulate prices. The study found that at the time of the investigation, 90% of the potatoes were owned by cold storage owners or traders.

Potatoes were sold at BDT 38-40 (USD 0.34-0.36) per kg from the storages, surpassing the government-fixed rate of BTD 26-27 (USD 0.23-0.24) per kg. To curb this price manipulation, the study recommends that preserved produce from cold storage be released into the open market at government-fixed prices with the involvement of local administration.

This would ensure transparency and prevent unscrupulous practices by cold-storage owners and traders. The Bangladesh Cold Storage Association disputes the accuracy of data provided by the agriculture ministry regarding potato production. According to the association, there is a significant discrepancy between the ministry's data and the reality of stored potatoes in cold storage facilities.

While the agriculture ministry claimed potato production to be 11 million tonnes, a surplus production of 2 million tonnes, the association argues that only 2.5 million tonnes of potatoes were stored in the country's cold storages. Despite the claimed surplus, the government has approved potato imports to control rising prices.

The Plant Quarantine Wing of the Department of Agriculture Extension has so far approved 161 entities to import 0.11 million tonnes of potatoes. However, these imports have had minimal impact on prices so far since they are primarily being sold in bordering districts.

The Bangladesh Cold Storage Association emphasizes the need for authentic and timely production data from the agriculture ministry to minimize problems in the future. Accurate data would allow stakeholders to make informed decisions and prevent price manipulation by cold storage owners.

Potato prices in Bangladesh are often manipulated by opportunistic traders who create artificial shortages in the market. This manipulation begins when traders purchase potatoes from farmers at low prices and store them in cold storage facilities.

\After keeping them in storage for some time, they sell them at significantly higher prices. The cost of storing potatoes in cold storage is BTD 7.10 (USD 0.064) per kg, including labor and transport costs. These potatoes should be sold at BYD 22 (USD 0.20) per kg at the cold storage level. However, after June, traders take advantage of the produce no longer being with farmers and create an artificial shortage, selling them at exorbitantly higher prices.

This manipulation is more prevalent during supply crises when there is a shortage of potatoes in the market. Although the government claims record production levels, cold storage owners report receiving smaller amounts than in previous years. The lack of accurate data on potato production and the government's failure to regulate the market has created opportunities for price manipulation by traders.

In addition to the potato price rise, onion prices in Bangladesh have been increasing due to export price hikes in India. Local onion prices have surged to BTD 120-140 (USD 1.08-1.26) per kg, impacting consumer affordability. The government has taken measures to regulate onion prices by fixing the maximum retail price and increasing imports. As high-stake national elections are barely two months away, the rising potato and onion prices are problematic for the Bangladesh government.