Buyback scheme blues: Govt. to compensate Nu 40.50 million to FCBL

Government will revamp the existing buyback scheme to incentive scheme price


The government will disburse Nu 40.50-million in compensation to the Food Corporation of Bhutan Limited (FCBL) for loss incurred in the buyback scheme for 2020 and 2021.

This is, probably, the highest compensation since the scheme was implemented by the Ministry of Agriculture and Forests (MoAF) as part of relief measures for farmers.

The scheme introduced in 2016 is aimed at encouraging farmers to work on farm production as means of achieving import substitution while also assuring a market for agricultural commodities to ensure that the farmers do not run into a total loss.

The compensation for the loss incurred in buyback includes Nu 29.08-million for 2020 for local potato, beans, cabbage, carrot, green chili, ginger, onion, pumpkin, sag, and radish among others, and Nu 11.42-million in 2021 for cabbage and ginger buyback.

In 2020, Phuentsholing auction yard reported a loss of Nu 18.60-million for 563,753-kg of 17 items while Damchhu collection point incurred a loss of Nu 9.60-million for 348,539-kg of 13 items.

An additional loss of Nu 0.6-million was reported in SamdrupJongkhar auction yard for 23,262-kg of potato while Gelephu auction yard reported the loss of Nu 0.29-million for 8,093-kg of beetroot, cabbage, and carrot.

The chief marketing officer of the department of agricultural marketing and cooperatives (DAMC) under MoAF, Dawa Tshering, said the compensation for 2021 excludes potato buyback as it is underway.

“We have not yet received the complete report of potato as the buyback is still ongoing. If FCB incurs a loss, the additional compensation will be given,” he added.

While the government has already risked heavy losses since there is no assurance to market the products, he said, it has become even more difficult because of the ongoing pandemic.

“In 2020, Damchhu collection point has incurred a huge loss as we went into lockdown,” he continued, adding that there were no marketing opportunities with the closure of the border.

“For instance, the price for a kg of cabbage last year fetched only Nu 5 to Nu 10 in the India market. But we had to pay our farmers Nu 15 a kg because their expectation was higher,” Dawa Tshering added. “The loss incurred in buyback becomes even higher when transportation and logistics costs are included.”

Despite the FCBL’s efforts in reminding through several announcements on media to bring the products on time, hoarding is still a major challenge.

FCBL Chief Executive Officer (CEO) Naiten Wangchuk said that the season-bound trade has to be finished within the season. “They are expecting a better price at the end of the season. It is a huge loss to the FCBL and the government.”

In addition, he thinks the farmers are also taking advantage of the government support through the assured marketing of the buyback scheme.

He went on to say that there is no business ethics for private sectors. “They want to do business only if there is profit. All these factors delay the marketing,” he said. “Private sector has to do business and grow but they have to do business as per the norms.”

The changes in rules and regulations in the neighboring country for agricultural-related trade are also another challenge. While the agricultural trade is informal in Bhutan, it is a formal trade in India.

“There are restricted, prohibited, and free items we cannot trade. For instance, potato is restricted item. So we have to obtain special approval from the government of India. We cannot keep on doing that. We have to have our own strategy and way out,” he added.

While there are not many challenges in importing, he said, exporting is more difficult. “There is a need for the government-to-government talks and formalizes the trade,” he said. “We have to focus on quality and implement the rules and regulations so that they can serve the long-term purpose between the countries.”

Meanwhile, given the scheme is not sustainable, the government has revamped the existing buyback scheme to the incentive scheme price and would implement staring this year.

Dawa Tshering said the revamped program is different. “This program will incentivize farmers and encourage them to produce what is required in the market,” he said. “We have to prioritize the commodities which are required by us that have nutritional value, import substitution, export opportunities, and add value in farmers’ income.”

“For instance, our farmers grow a lot of cabbage that is not nutritional and has fewer marketing opportunities. For this, the program will pay them less incentive keeping in mind that our farmers do not go into total loss,” he added.

While the government is entrusted to explore the farming and marketing opportunities for the farmers, he said, buyback and paying compensation is not sustainable.

“The government does not have the right to intervene and set the fixed price for commodities, but our farmers should not take advantage by charging exorbitant prices in the market,” he added. “If it is sold at affordable prices, I think there will not be many marketing challenges given that we produce only organic.”