Optimal stock for the public food grain distribution system in Bangladesh

The search for an estimate of the optimal stock of public foodgrain has been a constant and intense demand from donors and policymakers in Bangladesh. The meaning of optimality has, however, remained different to different persons. A general perception in these debates is that there may be a precise figure that represents the optimal level of public stock. Optimality implies minimization of cost or maximization of net gains in achieving an objective. In the context of the present exercise (that is, estimation of an optimal foodgrain stock for the government), the optimal level of public foodgrain stock is defined as the level of stock that ensures a number of objectives such as a certain degree of price stabilization and a certain amount of foodgrain supply through the rationing system and for the food-for-work operations, vulnerable group development, and other relief programs at minimum cost. The definition of optimality is somewhat limited in the sense that the benefits from these public interventions are not questioned and incorporated into the analysis. However, sensitivity to changes in various types of interventions and their implications for the estimates of optimal stock are shown in this paper. As a result, it is possible to point out the optimal level of public stock for the present degree of public interventions and the stock levels for reduced degrees of public interventions or changes in policies. This procedure gives a range of estimates of optimal stocks and the corresponding types and degrees of public interventions, providing a space for gradual reform in policies and management of interventions.

Goletti, Francesco
Ahmed, Raisuddin
Chowdhury, Nuimuddin
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International Food Policy Research Institute (IFPRI)
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