PUBLIC FOODGRAIN DISTRIBUTION AND POVERTY IN BANGLADESH

Abstract

The opportunity cost of food subsidy is high in Bangladesh; subsidy cost exceeded a billion taka mark in 1975-76. Although poverty is more widespread in rural than in urban areas, the country's 9 percent urban population shared 66 percent of the subsidized foodgrains in 1973-74. Levels of the foodgrain consumption of the urban poor would, however, have been lower by 15-24 percent without this subsidy. Rationing or open market sales of foodgrains for the rural landless households involves either a prohibitive cost or a disincentive to producers through low market prices. Input subsidy provides a policy option for resolution of this conflict. Increasing supply of ration foodgrains and/or lowering their prices will generate additional demand for other commodities at a faster rate than foodgrains. Therefore, rationing policies have implications for supply and prices of non-foodgrain commodities. For every dollar's worth of import, wheat offers a smaller disincentive to rice producers and a larger caloric gain to consumers than rice. A significant shift in policy reflecting this fact would require a reevaluation of the opportunity cost of the domestic programme for increasing wheat production.