Food experts estimate that over 2 million tonnes of rice is being smuggled every year from India into Bangladesh. This, according to current world rice prices is worth over Rs 4,000 crore

Soaring food prices across the globe has turned foodgrain smuggling into a prosperous industry. Food experts estimate that over 2 million tonnes of rice is being smuggled every year from India into Bangladesh. This, according to current world rice prices (Rs 20,000 per tonne) is worth Rs 4,000 crore.

Much of the foodgrain being allocated to the northeastern states, Bihar and eastern Uttar Pradesh, under the public distribution system (PDS) is finding its way into neighbouring countries including Bangladesh and Nepal.

Dr Pronab Sen, India’s chief statistician at the department of statistics, confirms: “Work done by the Washington-based International Food Policy Research Institute suggests that 2 million tonnes of rice has been finding its way into Bangladesh from 2000.”

This has set off alarm bells within the agriculture ministry, especially with rice production facing a decline. Statistics released by the ministry indicate that rice output dropped from 13.2 million tonnes last year to an expected 12.6 million tonnes this year.

“Such a marginal drop cannot explain why rice prices have doubled in India. The only explanation is smuggling. From the 24 million tonnes of rice allocated for the PDS, a sizeable amount is making its way to our rice-deficit neighbours,” says Sen.

The increase in rice smuggling has forced the government to impose a ban on all rice exports from April 1, 2008.

Planning Commission food expert Dr Abhijit Sen admits that foodgrain smuggling is difficult to control. “Part of the problem is a corrupt system; part of it is based on geographical reality. Bangladesh lost a sizeable portion of its rice crop due to the cyclone last year and is presently importing rice from Thailand at Rs 24,000 per tonne, and from the Philippines at $ 700 per tonne,” says Sen.

“With rice in India presently selling at Rs 12,000 per tonne, this becomes a lucrative industry especially since the border with Bangladesh is fairly porous. Nepal is also a food-deficit state with whom we have an open border,” Sen adds.

West Bengal is one of the largest rice producing states in the country, but its contribution to the PDS is a mere 1 million. On the other hand, Sen explains, Andhra Pradesh’s rice contribution crossed the 6 million tonne figure last year.

“The PDS network has always been leaking. Most of the leakage takes place at the ration shop level, and this is something that needs to be controlled,” Sen maintains.

A recent ORG-Marg report commissioned by the government revealed that 53% of the total amount of foodgrain distributed in the country through the PDS, and 39% of rice, was not reaching the poor.


In Arunachal Pradesh, 100% of rice meant for the very poor was being stolen, while 100% of wheat meant for below the poverty line (BPL) families was diverted.

Foodgrain theft is not restricted to states in the northeast. Over 44% of Delhi’s rice meant for BPL families does not reach them, while in Gujarat 41% of rice slotted for the poor is being diverted. Interestingly, even in a wheat-growing state like Haryana, 80% of wheat that’s meant for the poor is being sold in the black market, the report says.

The ORG-Marg study, conducted in 2005, covered a sample of 25,000 people. A more recent survey carried out by the National Council for Applied Economic Research (NCAER), covering 6,000 households in six states, confirms major limitations in the PDS.

The NCAER study points out that Uttar Pradesh has issued almost 1 crore more cards than it should have. Rajasthan has an excess of 24 lakh cards; Gujarat and Haryana have more than 10 lakh extra cards each.

Food expert Devinder Sharma believes the problem is being worsened by the hoarding of rice by several private companies. “Just as any private player who keeps more than 10,000 quintals of wheat must inform the government, the same needs to be done with rice. The Essential Commodities Act must be introduced to stop the hoarding of rice,” he says.

As the price of rice climbs across South Asia, farmers and millers in India are sitting on huge stocks waiting for it to rise further. An exporter, who requested anonymity, said: “In my two years of trading I have never seen such a bad situation. There is a rice shortage in Bangladesh and China. Sri Lanka is also building up its stocks… With India having banned the export of rise, obviously unscrupulous traders are going to step up smuggling in order to earn mega bucks.”

Food expert Dr M S Swaminathan warns: “An agricultural emergency is developing. The world is facing one of its worst food shortages. We need to take strong steps to build up adequate food stocks.”

-- Rashme Sehgal

InfoChange News & Features, May 2008