Commodity storage conditions in Bangladesh

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Commodity storage conditions in Bangladesh
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Rousseau, Rudolph
United States -- Congress. -- Senate. -- Committee on Foreign Relations. -- Subcommittee on Foreign Assistance
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94th Congress COMMITTEE PRibr
2d Sessions


COMMODITY STORAG-E CONI)ITTIONS

IN BANGLADESH







A STAFF REPORT

TO TIlE

SUBCOMMITTEE ON FOREIGN ASSISTANCE

OF THE

COMMITTEE ON FOREIGN RELATIONS


UNITED


STATES SENATE


SEPTEMBER 1976


Printed for the use of the Committee on Foreign Relations


U.S. GOVERNMENT PRINTING OFFICE


WASHINGTON : 1976


..j I


77-827































COMM ITTEE ON FOREIGN RELATIONS
JOHIN SPARKMAN, Alabama, Chairmnan


MIKE MANSFIEL), Montana
FRANK ('URCII, Idaho
STUART SYMINGTON, Missouri
CLAIBORNE PELL, Rhod lt1and
(iALE W. McGEE, Wyoming
G(EORHGE S. McGOVERN, South DLkota
ItUBERT 11. IhUMPhIREY, Minnesota
DICK CLARK, Iowa
JOSEP! R. BIDEN, JR., Delaware


CLIFFO RD P. CASE, New Jersey
JACOB K. JAV ITS, New York
I U GIL SCOTT, Peinsylvania
JAMES B. PEARSON, Kansas
CItARLES H. PERCY, Illinois
ROBERT P. GRIFFIN, Michigan


PAT M. 11OLT, Ch iff of Staff
ARTHUR M. KUHL, Chief Clerk



SUBCOMMITTEE ON FOREIGN ASSISTANCE
HUBERT H. HUMPHREY, Minnesota, Chairman


FRANK CIIURCHt, Idaho
GALE W. McGEE, Wyoming
GEORGE S. McGOVERN, South Dakota


CLIFFORD P. CASE, New Jersey
JACOB K. JAVITS, New York
II U G II SC OTT, Pennsylvania


RICHARD MOOSE, Staff Associate


(II)






















INTRODUCTION


During August 1976, at the instruction of the Subcommittee on
Foreign Assistance, several members of the Subcommittee staff
visited countries in South Asia to review the implementation of U.S.
foreign assistance programs. In the course of this undertaking, one
of the members of the group, Dr. Rudolph Rouisseau, examined the
food grain storage situation in Bangladesh.
Dr. Rousseau has considerable experience n assessing the prob-
lems of developing countries as viewed from academic, Executive
Branch, and Congressional perspectives. The report which he pre-
p)ared for the Subcommittee on food grain storage problems in Bangla-
desh, and which is printed here, offers some unusually direct comments
on the operation of our food aid programs. The -\iews expressed are
not necessarily those of any Member of the Subcommittee. Dr.
Rousseau has offered them for the Subcommittee's use and I consilel'
them to be of substantial value.
HUBERT I. ttUMPHREY.
(III)


















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COMMODITY STORAGE CONDITIONS IN BANGLADESH


SUMMARY AND (ONCLUSIONS
During the first nine months of 1976, the Ulited States has provi(ided
about 250,000 tons of P.L. 480 wheat, rice anit soybeanl oil Value(d -t
more than $50 million to Banglade4h. In(owledgeable observers ill
Bangladesh estimate that 100,000 to 200,000 tons of total fot I pplies
will be lost to insects, rodents all(l mold in the gnai.ries of that nation
this year.
The physical cau se of this unusually high level of foodI spoilage is
that bumper domestic crops combined with a large volule of im-
ported food are overt xing the 1torage capacity and
capability of the Government of Bangla(le-h. Food stored in inatde-
quate facilities has been exposed to the weather ail pests. The Govern-
ment has not been able to maintain thIe food stocks; properly and. ha,
not adequately managed their rotation and dist rib ition.
The physical causes of these are not unavoidable acts of iature:
lihey are the direct result of policies followed by the Governments of
Bangladesh, the United States, other donors a d il ternatiolal I
organizations. Responsible officials of the Government of Bamigladesli
are aware that food is spoiling in Government, warehouses. ttowever,
thev estimate losses of about three percent of the aloximaelv one
million tons in storage while other observers estimate losses of*10 to
20 percent.
Nevertheless, for fiscal andl political reasons, the Government of
Bangladesh has chosen to maximize the iniportltioll of lonate (Ir
concesi-onally financed food. Fscallv, the Governmient ias become
dependent on this food. In 1976 a)out 40 percent of the national
budget of Bangladesh was derived from (lonedtic sales of iiport e
food. Politically, the Government is well aware that one por ('op
or a natural disaster couIld tulrn a food surplus into a fo(! deficitt, with
all the attendant hardship for the people and political dangers for a
go vernment which uses the ration sv>teiit to subsi(dize thle cost of
food for the most politically volatile elements of the population. Tiis
fear is very real and firnmi based on the, recenI lwtor, of t!he oi i try.
For those reasons, the Government of Bangla -esh wants to keel) foo I
reserves at the hig.rhest possible levels and is willit)(, 1iV (elt in-
creased rates of spoilaoge. For the G(overnment of B1angialde+l, tlle
costs of Spoilage of donatel o conce-ional food are mnniiinial (coill-
pared with the financial and political iIpliczt ions of a food shortdae.
U.S. Government deci-.ions con(,erniing, s liiplit of P.I.N ('80cm-
noiities to Bangladesh were inflitenced by ti e recv list,,iy o" flod
shbortaoe'S iin that country iv adeqiate (l8Ia concenm'inn. crtj) mtic-
tion, and, 11ost sigiific antly, tile breaiu'ralic oif r:ivw- of !hie
sstemn by which tlhe (ieci- on+ were inaide. U.S. oficial knew o)I-
shiould lhave known that a sib-antmtal a"m'nouim'ut of food .vo,*ll spoil ii
(1)








Bangladesh if iiiiport- of large qtuan titie- of food from the United
stat es anld other donors c()fltiniied through the late spring and early
sllUmer of this vear. Yet. tle s1i)ilientisi were not suspenlde(l until late
'll, alf(1 40.0() tols of rice is scheduled to arrive at the port of
( llitt agollg inl SepteIll)er.
Once P.L. 480 pr)ogrmIll levels had 1)een established, not even the
wei-ht of i bunlper crop c-ill(I clieck the inertia of the bureaucratic
Proce-ss. As t res.iilt, tliotisaiu(s of tons of food will spoil in Bangladesh
this year. Further, unless the decisionniaking system is modified,
-inilar losses will occur in the future.

CONDITIONS IN STORAGE FACILITIES
Information abollt conditions of food in the storage facilities of the
Government of Bangladesh comes from two sources: reports of U.S.
field m lit 0rs* who travel throtghott the country inspecting the
('O1(lition of U.S.-sut)ilied comImodities and from personal inspection
of storage facilities (lllrin this visit to Baiigladesl.
A comparison of available storage space with commodities in
storage provides, a concise indication of why the food is spoiling in
Bangladesh. AID estimates that the Government of Bangladesh has
977,000 metric tons of effective storage space. The following table
lists the volume of commodities in storage.
Millions of metric tons
(Estimates supplied by All))
April--1.17
av_---1.25
June ..----------------------------------------------------------- 1.27
July---1.31
August_--1.21
September-----------------1. 10
This table show- that stocks exceeded effective storage space by as
much as 300,000 tons per month.
The reports from field monitors submitted since January 1976
indicate a progressive (leterioration of conditions in Government food
storage facilities. In the early months of the year, the reports con-
tained indications that consumption of Government stocks was
declining and that supplies were accumulating rapidly. In the late
spring and early summer, the field reports make more frequent
references to deteriorating conditions of stocks. The following direct
quotations from those reports provide a sample of their flavor and
contents:
SPRING
I. At present (SD (Central Storage Depot) is not facing
storage space problem. 'The condition of the godowns (ware-
houses) is good except for one go(lown, where the floor is
in miserable condition. A tarpaulin is being used under the
(lunnage to protect food grains. I found the stacks neatly
arranged and the godowns properly fumigated. No sign of
infestation was notice. Average ofrtake is very good in this
These field monitors, both U.S. and local hire, do a fine job under very difficult circum-
stances. Their work Is particularly important because no other donor regularly monitors
the condition of the food given to Bangladesh. FIt rther, the information in their reports
Is made available to appropriate officials of the Government of Bangladesh who may not
receive the Information from their own subordinates.








CSD because almost all the rationing dealers of [ I
district lift their quota front tins CSD.
II. 'he condition of Governinent godowns is good but the
condition of hired facilities is miserable. Most of them have
C.I. (corrugated iron) sheet roofs which have leakage in
several places as well as kutcha floors and walls made of
bamboo mats. Rat infestation was noticed in the godowns
which have kutcha floors. The food grain bags are stacked
in such a way that it is not possible to get inside the godowns
or fumigate the stock. During rainy eacon, rain water will
pour inside the godowns and there is likely to be further
food grain spoilage.
SUMMER
1. The first-in-first-out process is not being followed and
consequently, old stocks of rice are still at the back of the
godowns deteriorating day by day (I was told that)
all of the LSD (Local Storage Depots) were fumigated dur-
ing the last one to two months. But during the course of mv
visit to [ ] I found that out of the three godowns
in that LSD, not a single one was fumigated as of May .1,
1976-one godown was almost full of weevils, bugs and
frogs.
II. In addition to food grains, there was 10,076 bags of
relief materials consisting of rolled oats, fish powder, sorghum
grits and oil. The storage condition in FS type godowns
with light infestation was somehow bearable, but in Assam
type godown, condition was simply unbearable. I found thou-
sands of cockroaches flying across the goolowns when the door
was opened. There were weevils, too. The food grain bags
were not properly stacked and there was no center aisles in
between the stacks. The Store Keeper was not feeling com-
fortable when I asked him about the condition of the go-
downs. He simply mentioned that the stocks will be moved
out as soon as the dealers are turning in to take delivery
with the rise of prices of food grain in the market.
Personal visits to storage facilities confirmed the existence of con-
ditions similar to those noted in these reports. Most of the regular
Government storage facilities visited were well-built structures capa-
ble of protecting the food from both weather and pests. But even in
those facilities light to heavy insect infestation was evident. Nites
crawled across bags of grain and other insects, dead and alive, were
found in samples taken from some stocks of wheat and rice. While
these stocks could be saved if Irompt and effective action were taken,
the infestation indicates that some qualitative deterioration had oc-
curred and that the grain could become unfit for hiiiian consllinl)tion.
The condition of some "ternporarv" facilities used to store tlie
overflow of grain was very poor. In one abandoned factory iie"Ar
Dacca 40,000 bar, of heavily infested World Fo)od Progra in corn o ti-
ties were found. This food ilidt been stommri for at lea't nine inonIthl-
and the bags were alive with hiirg. The food hadl been (llate(d to the
Ministry of Relief and wa. intend(ed fo)r thIe neede(-t peole in t lie
country. AID officials estirn at el the valhie of t li foodit at -250,)0)0.







l fa 1'-t it t!t ,l o)()dy knioNws how mucd food has sJ)oiled in tile
l)hlic 1t a facilities of angladesh th is year. The ( at a
iiee'tlel to ImIIke aIl ct1"'It ( estimate is not available. Ilowever infor-
II nlion which i- avail able clelY indticat es that: a substantial quantity
of food will be l)t. The best estimates range, from 100,000 to 200,000
ton-. Fuir li'll, it i- readily al)parent that iml)orts of food from all
rces 1)ile(1 Onl t01) of domeIty 1)roctrel sto(k- created tile stor-
e ar(I niainagei enint l)ro/l)h'ns which contribulted to the losses. hat
i- ti lie central point.
FOOl) POLICY DECISIONS: BANGLADESH
Al lt(e .- .1"iv of 1976, even after montls of reports of food slioilage
an( l stock lo.s''-, the Govern ment of Bangla(lesh continued to request
additioll1 s!'hil)MelItS of donated or concessionally fiiinan(d coimlo(li-
ties. '11e I)asic reas-ons for this request are relatively clear: wastage
()f dIoiated food c" sts Bangladesh little or nothing and wastage of
(10)i(1'-,lO1_,1allv {inajice(l food such as P.L. 480 represents a claim on a
f'tattre oener(tion N\iich must repay the long-term loan. Immediate
(.)sts 're Inliimal. I however, for the Government nn(d peoIle of
imtnglzleshi the political and financial consequences of a food short-
age Vould he severe, a fact which the recent history of Bangladesh
(lezloi.on-4tftes t 2agically.
!:(bo )oli(y decisions of the Government of Bangladesh have three
basic elenlent-.. Fit-st, the food supply situation can change dramat-
i,'allv and suddenly. One bad crop or a natural (lisaster can turn a
sq~l't)ius to a, deficitt in a matter of weeks or months. Even the most
l)-oilisiniilg harvest can be lost suddenly. Given the lead times needed
to import grain from the U.S. or Europe, the maintenance of a large
food reserve provides an element of food security.
'The second basic element of Bangladesh food policy is political and
relates to the total availability of food in the country and the way in
which the government uses the ration system. An overall food shortage
(oul(l represent a political threat to the present government as it has
to previous governments. Little more need be said about that factor.
But the Government of Bangladesh nee(1s imjporte(l food for another
political reason. The ration system through which this food is dis-
tributed is designed to subsidize the food supplies of the most politically
significant )ortions of the population: urban residents, the military,
r" I i s n
civil servants, police, students, etc. The political consequences of an
interrlptioni or reduction of subsidization of the food su1pplies of these
elenients of the population could be damaging to the government.
The third element of food policy relates to the domestic financial
effects of imported coimmnodities. The government sells the imported
comimodities throgli its ration shops. In 1976, these sales generated
40 percent of the national budget of Bangladesh. The proI)ortion
fluctuates from year to year, but the significant fact is that donated
or concessional-financed food represents a iiiajor source of revenue
for the government. Ihis element may be less significant in policy
decisions at this tinme i)ccause sales of government food are much
lower than normal. In some areas, so much food is available that open
market prices are below ration shop prices. Nevertheless, in the overall
policy-ma king process, these reve inue considerations are very im-
portant.






POLICY DECISIONS: THtE UNITED STATES


U.S. food p)olicN decisiOns were ililenl(( d y i'ie W-411 a Irti i(i-
about food supplies anl storage cn(li tioiis Wlli"w l c ;f'rct(A dcc(io:
of the Government of Bangjadesh. But, i1Nore :i gnifica iii 1.S.
decisions were affected by the bureaucratic iiil)ci'ai, -e, of ie of' hem
by which food policy decisions were made.
Given the physical conditions in Bangl,(dcil, U... offihlli re-
sponsible for decisions concerning P. L. 480 shipmet> to 1!l/lziJFh
were very conscious of the possibility that a fowd -iriiv com1d
beconle a food deficit il a very short timie. Acclor(trig to J ,rti(i pauts
in tlhe dcsioninalking process, this 1)ssibilit3" NV ai: ilIil)ortatit fa,-
tor i) decisions n adle before the harvests- vere (onli)Jeted ii t1 e late
fall of 1975 and spring of 1976. Many of t liese anwe oflticial were
criticized when U.S. assistance was not iminediatelv av.-tilable (I ,'i11g
a recent famine in Baigladelh. They did not wish to be p)lace(d in
that situation again.
Despite the uncertailnties of forecasting food t)ro(lIction in Bang-
ladesh, U.S. officials were receiving regular rej)orlts about conditions
in grain storage facilitis. As noted in Table 1, tlhrotigul lhe -pIriig ais
tile critical policy decisionss were being made, the U.S. tid infoi'ination
that available stocks exceeded effective storage capacity. Nore
significantly, during that same period, reports front tile liNion'S Own
inspectors indicated that infe- atio and spoilage would increase as
stocks rose a(i sales declined.
On April 28, 1976, despite the overflowillg storage facilities and
reports of infestation am slihage, the U.S. Einba<- v.. in. D-cca
recommended that the United States sh) 1150,00(0 metic tons of
wheat and 50,000 metric tons of rice to Bangladeshi between Ju:Iy
and September. Washington at first agreed to the recomnien(lations
then modified the decision and shipped only 50,000 t,.fl of IiCe.
To understand why the United States (leci(e(t to Sil) a(1(litiolal
grain to Bangladesh at a time wlhen storage facilities were overf\l)(,ir
and grain already spoiling, food I)ohicx deci'iois 1iiit be revieNx ed In
some detail.
Through March and April thle food continue(1 to flow from th~e
United States and ot her (donors. Reports of sj)oilage iwCre.i-ed(. AID'
figures indicate that stock levels exceeded effective storage ciI a it-
and another bum)er rice crop w\a5 onl the wa V.
On April 28, 1976, the U.S. Embassy in Dacca called it recollen-
dation that the United States send Bangladesh 150,000 I on, (of Nvle('i t
and 50,000 tons of rice between July and Se ieiier "(A l ,
the USDA issue the lpurchas,. autlhorizat ioin for lle ,'(,)' 'ii, :
recolnmmen(led by the Enibassy. Later, after (, i(lenaY }imrea wratiic
infighting, the shipment of 150,000 tons of Vbeat W IH sa>-i; jw { ti.rd-
in,, further review of the food situation.
Tphe April 28 recolmnlend(lation to provide a(lit io, al P.l. 4,.() CMA-
miodifiets to Bai ing. The (Ieciion is qne-.,,tiolable becall- e t l i ., '1 >1 a,,,l efl,1 -
in Dacca reconlien(le(I andl Wa-Iiiilrtoui arTCtId to Il)Iide v~i to
Bangladesh despite 1}be overfil(wing -,4orau'.i fzaciliti>, If i ,'rea ,! I)f -Til-
age. The decisionn is ite (Ve-t il,, lwctas I(,H of wIlat it n'(vet,, aboui h(1e
(vnaim.li-cs- of the process by Wlvic L .. food i,!lc iy d ,i-i n re ,iie








11i 'Mi- ion-, sibsequent actions are the best evidence that the
o1Iicia1k responsible for making the April 28 d(ciion were aware that
food spoiling i the grainaries of Bangladesh and that shipping
additional L.S. commodities (.0111d exacerbate the problem. On May
17. only 19 days after the Mission recommended that 200,000 tons of
P.L. 480 wheat and rice be sent to Bangladesh, the Mission reversed
itself and recommended that "no procurement action be taken on
PA's (purchase authorizations) for 150,000 tons of wheat and 50,000
tons of rice until after further review of foodgrain situation." The
condition, in storage facilitie- had not deteriorated that rapidly in 19
days. The basic facts about the food storage and supply situation
were known on April 28, yet the Embassy recommended the shipment
and Washington agreed.
Participants in the April 28 decion indicate that there was sub-
stantial disagreement among the agencies involved. Basically, the
USDA wanted to provide the grain while AID did not. These partici-
pants indicate that USDA was under pressure to move P.L. 480 com-
modities, particularly rice. AID with its administrative responsibilities
was under conflicting pressure to prevent wastage of food. USDA won
the first round. AID won a partial victory in the second. The rice was
shipped, the wheat was not.
In late July, shipments of P.L. 480 commodities to Bangladesh were
suspended for the remainder of 1976. However, in late August and the
first week of September, four ships carrying 60 thousand tons of P.L.
480 rice arrived at Chittagong.







UNIVERSITY OF FLORIDA

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