PadiBeras Nasional Berhad (Bernas) is set to lose its monopoly over the import of rice in 2021 and while the liberalisation of any market would normally be beneficial, there is a strong view that in the rice industry this is not so.
In this two-part special report, The Mole explores why ruffling the existing paddy rice industry model is sparking concern among the more erudite farmers in the country.
ALOR SETAR — Aug. 30, 2018: It is sweltering hot, dry and a tad breezy here in Kedah but one hardly hears any complaint, especially among paddy farmers. The reason? The much-anticipated paddy-harvesting season has begun.
While most of his younger peers were in good spirits, seasoned paddy farmer Azmi Shapii sported a worried look as he stared intently at his greenish-gold paddy fields near the imposing Keriang Hill here.
An unnerving news has been bugging him and it was regarding the government’s plan to allow more companies to import rice by way of breaking the PadiBeras Nasional Berhad’s (Bernas) rice import monopoly.
“Of course I’m worried. Can the government guarantee that these companies will be able to emulate Bernas’ social obligations to the farmers? I highly doubt it,” said the 68-year-old Alor Janggus-based farmer.
“Bernas has its flaws but at least it was founded to protect the interest of farmers, whereas it’s all just dollars and cents to these other companies,” added the weather-beaten farmer who has been toiling paddy fields since he was a teenager.
Rice farming is a big deal in Kedah, so much so that half of the country’s rice is produced here.
On the political front, issues related to the crop were also believed to have been instrumental in the ouster of two of the state’s mentri besar in the 80s and 90s.
Misgivings over the monopoly’s end
The logic of ending Bernas’ rice import monopoly, said Agriculture and Agro-based Industry Minister Salahuddin Ayub, was intended to reduce the retail price of rice.
In a typical trade environment, Salahuddin’s argument may hold water but since rice is a controlled item, it is unlikely that allowing more companies to import rice will easily translate to cheaper rice.
While the price of imported rice fluctuates – due to market competition – Malaysia’s national rice policy dictates that imported rice shall not be sold at a price that is lower than locally produced rice.
And since imported rice make-up 28 per cent of the Malaysia’s self-sufficiency level, it is anybody’s guess how far-reaching, impactful and beneficial the government’s plan to liberalise the importation of rice will be.
The need to end Bernas’ monopoly was first mooted by a pressure group called Padi Rescue, last year, claiming that the company had “miserably failed” to carry out its social obligations to the farmers.
While there are grouses against Bernas, there is also the worry that the company would no longer perform its social obligations if it lose its import monopoly.
“Why should they (Bernas)? They are a business entity too. Should Bernas stop doing their social obligations, the farmers would be the ones to suffer the most,” said a farmer who spoke under the condition of anonymity.
This was so, the farmer explained, because Bernas’ monopoly had inadvertently encourage commercial millers to offer better and more competitive deals to farmers in order to one-up the company.
How Bernas came to be
Bernas –back when it was called the National Paddy Rice Agency (LPN) before its 1996 corporatisation– was founded in the wake of the global rice crisis in 1971 where the price of the commodity surged exponentially.
Being the country’s sole rice importer, Bernas not only functions as a price stabiliser but also manages national rice stockpiling and disburse paddy rice subsidies to farmers on behalf of the government.
However, the company’s most prominent social role to farmers is as the buyer of last resort, in which Bernas will buy all paddy that are delivered to its mill regardless of qualities at a guaranteed minimum price (GMP) of RM750 per tonne.
“Other millers would flatly reject sub-standard paddy but Bernas, on the other hand, would still buy it even if they have to deduct as high as 50 per cent of the yield that are sent to them,” said a Sanglang-based farmer, Jaafar Zakaria.
The harvest-related income of paddy farmers are based on an inversely proportional dedication grading system –as outlined by the government– where the higher the percentage translates to less profit for the farmers.
For example, a 20 per cent grading on a tonne of paddy would earn a farmer a profit of RM600 against the GMP or RM960 against the national standardised paddy price of RM1,200 per tonne.
So far, those of Bernas insisted that the end of its monopoly has yet to be cast in stone as the matter is still being discussed with the ministry. The company had also until today reiterated that it would continue its role as a buyer of last resort.
“We will buy everything even if we would incur losses. Sometimes, the crop is so substandard that it feels like we’re paying for nothing,” quipped Mohamad Solhi Mohd Salleh, a department head of a Bernas rice mill in Simpang Empat Kangkong.