The Bhutanese Leading the way.
During the initial stages of implementation of the Buy Back Scheme (BBS), in 2016, 2017, and 2019, the Food Corporation of Bhutan Limited (FCBL) was able to generate a profit of around Nu 3.34 million (mn), Nu 4.43 mn, and 4.85 mn respectively from buy back of paddy, maize and cardamom.
However, it all went downhill from there after the pandemic started in 2020 and various trade and other restrictions came up with the result that from 2020 to 2022 the government had to bear a loss of Nu 192.48 mn in buying back vegetables.
In 2020, the FCBL suffered losses of Nu 29.08 mn on assorted vegetables, carrot and cabbage. The losses were caused due to lockdowns, COVID protocol and since the vegetables were not listed in the plant quarantine list of India. The heaviest losses were in cabbage followed by carrots and then assorted vegetables.
The profit from potatoes and combo pack reduced the magnitude of losses which could have been much higher.
In 2021 the government bore losses of Nu 46.03 mn approximately on ginger and Nu 42.19 mn on potatoes. This was mainly due to trade restrictions from India and also a bumper harvest in India and certain trade restrictions in Nepal and Bangladesh too.
In 2022 the FCBL lost Nu 75.18 mn in ginger mainly due to trade restrictions from India as it was too late when the restrictions were lifted as the ginger had mainly spoilt.
The Department of Agricultural and Marketing Cooperatives (DAMC) said apart from the above issues, dealing with sporadic sites and low volumes raises transaction costs. Farmers typically have high pricing expectations that are not in line with market circumstances (price, demand etc.).
Highlighting the challenges, DAMC explained that Buy-back, though helpful for the farmers during market distress, poses a huge financial burden to the government. The implementation of the Buy Back scheme is difficult due to the nature of the perishability of the goods, lack of proper storage facilities and dearth of market upon buy back.
As per FCBL, Buyback is a bad system since it exhausts government resources while giving farmers financial relief.
The buy back scheme has now been discontinued as of April 2022 and replaced by the Incentive Scheme for Market led production of RNR commodities.
This new scheme aims at incentivizing farmers to promote production of RNR commodities that contribute towards achieving national food security, have better nutritional value, potential for higher incomes to farmers, and enhance import substitution and export promotion.
The scheme is to compensate farmers, at a pre-determined price, should there be no demand for RNR commodities produced or when the prevailing market price is less than the cost of production.
The difference from the buy back is that it will only compensate farmers for certain identified priority crops, and the rates will not be as high like before.
Buy Back Scheme was a government program to provide market access to farmers at times of market failures, establish alternative marketing channel for small-holder farmers, facilitate marketing of semi-commercial production, promote market-led production in long run, and facilitate aggregation, value addition and marketing through farmers’ groups and cooperatives.
The scheme was implemented by the FCBL upon instructions from the government.
One of the Farm Shop’s three intended roles was buy-back. The establishment of farm-shops began quickly, whereas the execution of the buy-back program was delayed due to the requirement for an implementation modality or a guideline.
The Implementation Modality and the Guideline were developed over the next few years. In 2016, buy-back was adopted on a trial basis. The buy-back scheme was formally launched in 2017 with the Agriculture Minister issuing an Executive Order on April 4, 2017.
MoAF announced the Buy-back price every December. DAMC is supposed to invoke implementing the buy-back through a note to the Cabinet. However, it was also invoked through an instruction from the Cabinet or Portfolio Minister Upon approval of Cabinet, FCBL implements
