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Professor Nurul Islam

About Professor Nurul Islam:

(Professor Nurul Islam provides a penetrating analysis of the evolving struggle of the Bengalis’ with Pakistan government’s policies on economic issues that led to the birth of Bangladesh. He also provides an insight into the important landmark economic policy issues during Bangladesh’s formative years. The book begins by providing for the first time an insider’s view of many little known aspects or subjects of economic debates and negotiations with Pakistan that caused the great divide between East and West Pakistan. He also examines in great detail the far reaching implications of Awami League’s Six Point Programme, which was not fully understood by many at that time.
In his capacity as the Deputy Chairman of the first Bangladesh Planning Commission he was not only intimately associated with but also had a unique insight into both the underlying rationale, the process of decision making and of governance in those formative years.
The interpretation or assessment of some of these policy issues and developments remains a subject of considerable controversy. Professor Islam’s analysis is seen as a major contribution to the debate which attempts to fill many gaps in facts and interpretation. In the concluding part of the book, he discusses a few policy issues of contemporaneous importance for Bangladesh in the light of the past and for the purposes of the future.
In his analysis of the major issues and incidents, he has drawn on his personal notes as well as on many hitherto unpublished reports, documents and communications, a few of which are reproduced in the book.
This book will be particularly useful for students, teachers and policy makers as well as those interested in the political economy of nation building.
Professor Nurul Islam was successively (1955-1975), professor of Economics, Dhaka University, Director if the Pakistan Institute of Development Economics, (Later Bangladesh Institute of Development Studies), Deputy Chairman of the first Planning Commission of Bangladesh. From 1975 onwards he was fellow at the International Food Policy Research Institute.
He held several visiting academic appointments at Yale and Cambridge University and both London and Netherlands School of Economics. He was a member and later the Chairman of the UN Committee of Development Planning policy.
He has written extensively on various aspects of trade, development, food security and public policy. Among his published books are: Development Planning in Bangladesh: A Study in Political Economy (UPL, 1979, reprint 1993), Development Strategy of Bangladesh (Pergamon, 1978), Foodgrain Price Stabilization in Developing Countries: Issues and Experiences in Asia (IFPRI, 1996) and Exploration in Development Issues: Selected Articles of Nurul Islam Islam (Ashgate, 2003).


In the recent history of famines around the Third World, the 1974 Bangladesh famine is one of the most well known, much analysed by social scientists at home and abroad as to its cause and consequences.1 At home, its causes have been a matter of some controversy, often subject to varying, sometimes opposing, interpretations by different analysts or people with different political affiliations. Naturally, the government of the day bore the greatest responsibility as famine always brings discredit to any government. It is considered a mark of a government’s failure that in its watch people died for want of food i.e. the most basic necessity of life. As one looks back at this phenomenon, it appears that during the period of the famine itself, not all the factors that contributed to it were recognised in terms of their true significance and in proper perspective.


The proximate causes of the 1974 famine were multiple: natural disasters (floods), speculative market behavior in response to current and expected crop failures, adverse macroeconomic external a circumstances, and non-availability of food aid at the moment of crisis. All these factors acted together to depress entitlement to food on the part of the most vulnerable groups i.e. those who depended wholly or partially on wage labour for access to food. Over the years up to the early 1970s, there had been an increase in the proportion if marginal farmers and landless labourers in the rural population. The proportion of landless households was around 40 percent.2 There was persistent monetary expansion ranging between 70 percent in1972 to 18 percent in 1973, resulting in a large monetary overhang up to mid-1974. This was fuelled by budgetary deficit, caused by severe short fall in revenues and increased expenditures of establishing a new government, large deficits of the bank financed public enterprises and expansion of the private sector credit for trading, construction, and commodity speculation.3 Consumer price index rose 52 percent in 1972, 33 percent in 1973 and 21 percent in January-June 1974. Inflation led to a sharp fall in real wages of marginal farmers, agricultural workers, and urban workers.

1A.K. Sen, Poverty and Famine: An Essay in Entitlement and Deprivation, Oxford (1981). M.Alamgir, Famine in South Asia-Political Economic of Mass Starvation in Bangladesh. Cambridge, Mass: Oelgeschlager, Gunn and Hain, 1980;
M.Ahmed, Bangladesh: Era of Sheikh Mujibur Rahman, Chapter 9, Food and Famine, The University Press Limited, Dhaka, 1983.

2 S.R. Osmani, The Food Problem of Bangladesh. UN WIDER Working paper 29 (November 1987).

3 A. Hossain, “A Second Look at the 1974 Famine: Additional Insights and Policy Implications.” Journal of Bangladesh Studies, Vol.1,No.1 (1999).
The rise in the nominal (and real) price of rice in September-November 1974 was more than twice that in the corresponding period in 1973.4 Why did the price of rice record such a large increase? Was rice output in 1974 smaller than that in 1973? Rice output in calendar year 1974 (consisting of Aman harvests 1973, Boro 1974, and Aus 1974) was higher than the corresponding output in 1973. But the floods in July-August 1974 caused not only extensive damage to jute crop, a major source of employment and cash income for the rural population, but more importantly, it adversely affected planting for the next Aman and created the fear of a large short fall in the next Aman crop. Added to this were exaggerated press reports about damage to the Aus crop and the impending short fall in the Aman crop. Both factors greatly aggravated the fears of future scarcity. The newly established crop forecasting system was not yet realize enough to correctly estimate the crop damage by floods or possible short fall in the Aman crop that might be caused by the late planting. With a great deal of uncertainly among traders and public agencies regarding the evolving food supply, the time was rife for speculation. Most relevant for the expectation of future prices-the critical variable that determined the accumulation of trader’s stocks and speculative hoarding- was the ex ante expectation of a short fall in the Aman crop.5 The fear of food shortage was to be judged in the background of a very fragile food situation that persisted in the years since independence. In the aftermath of six consecutive bad crops from Aman 1971 to Aus 1973, including war damaged Boro crop in 1972, about 1 million tons of foodgrains had to be imported during 1972-73 mostly on commercial terms. The stocks of traders and farmers were greatly depleted and badly needed to be replenished.

Prices started to rise from March 1974 onwards. Why? There was a severe reduction in public stocks starting end 1973. Which fell by more than half between 1972-73 and early 1974 when it was barely 150,000 tons. A drastic reduction in public distribution, specially the modified rationing system and the relief distribution, starting January 19746 led to the collapse of confidence in the government’s ability to stabilise the price situation in the coming months. This triggered a sharp rise in price as early as March 1974. There was an upsurge in speculative holdings of stocks by farmers, consumers, and traders (both genuine traders and the new, rich speculators) in anticipation of future scarcities.

4 The real price by 65-80 percent between the corresponding periods.

5 A. Hossain, lbid. In the event rice output was 11.72 million tons in 1974 compared with 9.93 million tons in 1973 and 9.79 million tons in 1972. The estimates of loss due to flood and drought were 0.31 million tons and 0.25 million tons respectively in 1972 and 1973, whereas the estimate of loss was 0.65 million tons in 1974.

6 Sobhan, R., “Politics of Food and Famine in Bangladesh,” Economic and Political Weekly (1984). The modified rationing system was intended for the poorest segment in the rural areas, whereas relief distribution consisted of free distribution of food to destitutes and those in severe economic distress.
The attempt by the government to procure food from abroad did not succeed party because of its own limited foreign exchange resources and party because of delays in the commitment of aid by the United States. Foreign exchange reserves in the first quarter of 1974 were less than half of that in the first quarter of 1973. Reserves in the third quarter of 1974 were about 25 percent of what it was in the third quarter of 1973. Borrowings under the IMF compensatory financing facility were also meagre- no more than US$35 million starting in the second quarter of 1974 with US$18.1 million and US$ 38.1 million in the succeeding quarters. The creditworthiness of Bangladesh was so low that purchases contracted under short term commercial credit were cancelled.7 By September and October in 1974, monthly imports ranged between 29,000 and 70,000 tons compared to the monthly requirement of 250,000-300,000 tons.


Was smuggling to India large enough to create such a scarcity? During 1973-74 right up to the famine period, there were widespread rumours and reports in the press of smuggling of foodgrains to India. In response, the government employed the army to guard the borders against smuggling from April 1974 onwards. There was no way one could estimate smuggling of foodgrains from direct observations. From the list of goods confiscated by the army at the borders, it appeared that rice was hardly the most important item, but sixth or seventh in importance. Brian Reddaway of Cambridge University, England, visiting the Bangladesh Institute of Development Studies at that time, was requested to undertake a study of the subject. His study was based on an indirect method of comparison of rice prices in border areas with those in the interior markets that were on the direct trade route to the border areas. Ex hypothesi, in case there was a large scale smuggling, prices

7 It is interesting to reflect on the shortness of public memory. Recently, a highly educated member of the party in power in 1974 asked me why not possible for the government to import rice from Thailand, a close-by country with large export surplus in order to damp down the rising prices. He had to be remained that there was very little foreign exchange resources and that prices in the world market were sky high. Even if by some turn of luck we could get commercial credit and were able to purchase, we could not possibly ship it on time. There was a great demand on shipping space in view of many countries rushing to buy food in the face of the worldwide food crisis. In addition, shipping cost sky rocketed pari passu.
Even as early as the second half of 1973, in response to delays in (a) shipment of committed aid by US as well as (b) in the commitment of new US aid, the government was obliged to seek an alternative short term relief to tide over the delay. The USSR was requested to divert to Bangladesh 200,000 tons of grain she had purchased from Canada and the USA in order for Bangladesh to avert a breakdown in the public food distribution system. They were received during July-October 1973. It was expected that when the US food aid came through later on in the year, it would be possible to divert the grain shipments to the USSR to repay the debt. Subsequently, however, the US declined to accept the arrangements for “swap” and a short term deferred payment arrangement was worked out with the USSR for its wheat shipment.

Were most likely to be higher in the border areas than in the interior markets that were supplying rice for smuggling. On a study of price behaviour in different markets, he came to the conclusion that smuggling was not significant so as to run into hundreds of thousands of tons.

Direct comparisons of prices of jute in the border market in Bangladesh with those in a neighboring border market in India- converted at the prevailing black market rates of exchange between the Bangladesh and India currencies- did not indicate high enough profit to justify large-scale smuggling.8 Large scale smuggling would be inconsistent with highly variable smuggling profit margin from month to month. The evidence indicated high variability. This was consistent with the hypothesis of limited smuggling.

During this period, I had an interesting encounter with Zia who was the Deputy Chief of Staff in the army and was involved in supervising the anti-smuggling operations along the borders. He at his own initiative came to see me in my capacity as the Deputy Chairman to discuss his findings or judgment that there was a very large scale smuggling ranging anywhere from half a million to a million tons. He felt that the Prime Minister was not correctly informed by his political colleagues and officials about the scale of smuggling. Under the circumstances, I should intervene to convince the Prime Minister about the gravity of the situation.

There was some discussion between us as to the evidence the army had about large scale rice smuggling. In the absence of any direct estimate of smuggling. I tried to engage him in a discussion about various indirect indicators that could help to explain or give an idea about the scale of smuggling. For example, I wanted to know how, in his opinion; hundreds of thousands of tons of rice were being smuggled in such a short time (between April-June). This discussion took place at the time of the onset of July-August 1974 floods when prices rose very sharply. If smuggling was the cause for such a spurt in prices, then it had to occur on a very large scale in the months immediately following Aman and Boro harvests. How were such large quantities transported of carried across the borders in such a short period? If rice was to be transported in such large quantities, it could not be done in small lots by individual smugglers. If that was the case, then very large members of people or smugglers were to be seen crossing back and forth the border continuously for a month or so. This was obviously ruled out, since the army had not confirmed a large scale continuous movement of people. Alternatively, rice had to be transported in big trucks and barges and that was possible only through a few points at the border where they could physically pass through. Therefore, if very substantial smuggling did take place, it was unlikely that such a large scale crossborder movements of trucks and barges would not have been detected by the public, the Bangladesh Rifles (BDR) and the army.

8 W.B. Reddaway and M. Rehman, The Scale of Smuggling Out of Bangladesh, BIDS (February 1975)
However, it was the contention of the army that even if they had observed such large scale movements, they could not have seized or taken preventive action since local party workers or leaders were in league with smugglers with the connivance of local officials.9 But then newspapers, which were full of reports and rumours on the food situation, did not report such a very large scale movement of trucks and barges within the span of such a short period.

The issue was not that there was no smuggling. In fact, there was smuggling on a regular basis since 1971 in spite of the presence of border defense forces. The relevant question was how big was this smuggling of rice (as distinguished from other commodities), and whether smuggling of rice could have taken place on a large enough scale within a very short period to cause the price of rice to skyrocket. Estimates of massive smuggling to rice that Zia conveyed appeared improbable, considering the limited time involved and the poor state of roads and transportation systems in the border and adjoining areas in the early days of Bangladesh.

Zia was unhappy about the results of our long discussion. Much later when he was the Deputy Martial Law Administrator and was, in addition, in charge of the portfolios of planning and Finance, he had an official in his staff who had earlier worked with me. He had a long memory, recognized the officer, and recalled to him that he could not convince me about the scale and implications of smuggling of rice to India. At this distance of time, one remembers that those were the days when emotions ran very high and the country was passing through a great trauma. It was possible that disagreements on reasonable grounds could be considered to be a politically inspired defense of an official position.10

9 He suggested that politicians were engaged in such activities, earning hung illegal incomes in the process. There were instances when the army apprehended a few party workers of local leaders who were engaged either directly in sponsoring or protecting such smugglers and there were interferences and interventions by the top political leadership to let them free. As against these allegations, there were counter-accusations and rumours that the party’s political workers were being unduly and indiscriminately harassed by the army.

10 The alleged scale of smuggling remained a matter of casual empiricism at best. Crossborder illegal trade, in general, is a widely recognized phenomenon in response to changes in relative prices in Bangladesh and India. Unfortunately, there have been few studies done in the last 30 years on a subject of such great public concern. No comprehensive research based on a systematic collection of direct and indirect data from both sides of the border was undertaken. No attempt was made to elaborate and expand even the simple methodology of professor Reddaway (this methodology could be improved, in fact, along the lines suggested by Professor Reddaway himself) in respect of different years and many commodities. I understand that a major study of Indo-Bangladesh trade including size and composition of illegal trade, supported by surveys and systematic data collection on both sides of the border, is underway under the auspices of the World Bank.

Reverting to the subject of the 1974 famine, under the circumstances depicted above, the government had three principal means at its disposal to deal with the emerging food crisis. First, it could resort to the domestic procurement of rice for building stocks to maintain the public distribution system. The circumstances were less than propitious for a successful public procurement. First, due to short falls in production in 1972 and 1973, a major effort by private traders and farmers to rebuild in 1974 their severely depleted stocks was unavoidable in any case, no matter what was the future price expectation. An attempt was launched in the early months of 1974 to intensify procurement efforts. Procurement was not a success in 1973. It was voluntary and the procurement price was lower than the market price. This was reportedly made worse by inefficiency and corruption of the government agencies. In 1974, procurement was made compulsory from all farmers according to a graduated scale. The movement of rice from surplus areas was banned in order to facilitate procurement in those areas. Local committees consisting of (a) officials, (b) representatives of local elites, and (c) political workers/leaders were constituted to facilitate procurement. The committees were ineffective and were not of much help in facilitating procurement. Already the expectation of a short fall in the next Aman crop had given a boost to private hoarding. The introduction of compulsory procurement had unwanted consequences; it aggravated the fear of future shortages and further spurred the tendency to hoard.11 Total procurement in 1974 was no more than 130,000 tons.

The second measure available to the government was to somehow mobilize public opinion and galvanise the support of the people, including traders and hoarders, to release stocks in view of the national crisis. This required a very high degree of public confidence in the government. It was in such an environment that I ventured to approach the Prime Minister with a plea on the basis of my behalf that he still had very great credibility and stature in the country. I suggested that he should go around the country to appeal to traders, hoarders, and farmers that at a time of crises they should release their stocks, either in the market or to the public procurement agencies and share their supplies with the people at large. Under his leadership, his political colleagues should also join in the task of mobilizing public opinion and organizing people’s participation in a common effort. After all, he had once led and mobilised the entire nation to fight for independence at great sacrifices. This was an equally great-if not a greater- challenge that he needed to face, and enthuse and lead people to overcome.12

11 J. Faaland et al. Aid and Influence (London: Macmillan, 1981)
12 [I vividly remember the occasion when I was making this plea on a monsoon day in mid-1974 darkened by heavy clouds and rain, alone in the Prime Minister’s office. He was greatly worried and looked visibly concerned. He started to pace up and down in his room; soon he turned towards me and uttered in a painful voice almost as a soliloquy, “You do not know the people of Bangladesh. I have lived and worked with them at all levels for many years of my life and know them very well. They are very unforgiving. If one commits one mistake or fails them obnce, all your life’s work goes in vain. They called me Father of the Nation: in no time they could turn around and call me… (Expletive) of the Nation.” I realised that he did not think that he could perform the wonders that I wished him to perform. I never knew what “mistake” he was referring to in his remarks. After a few words, I left in a spirit of sadness.]

As I look back, I was indeed very naïve in making such a suggestion. Appeals to collective interests or threats of penalty never did stop speculative hoarding, specially when rooted in strong price expectations. A massive countrywide mobilisation of the people at the grassroots level by highly motivated local leadership and popular organizations might theoretically achieve such a feat. Unfortunately, history does not provide such examples, not to speak of the fact that the socio-political circumstances in Bangladesh were a far cry from such a scenario in terms either of organisation or motivation.13

In the absence of the above half measure that one could suggest in a state of desperation, the real effective policy that would have averted the crisis was to substantially augment the supplies of foodgrains (rice and wheat) to break the back of rampant speculation. Building up government stocks and releasing large quantities in the market through the public distribution system could have restored confidence of traders and speculators in the ability of the government to deal with the situation. To this end, efforts were vigorously mounted to plead with all possible sources of food aid supplies. The world market was caught in a rising spiral of food prices, now known as the World Food Crises of 1974. China and Russia made large scale purchases in the world market. The only foreign source that could provide enough food aid was the United States.


Around mid-1973, we approached the USAID with a request for food aid for the fiscal year 1973-74 so as to provide a sufficient lead-time. This was not for the first time since independence that Bangladesh requested and received food aid. In both 1972 and early 1973, Bangladesh received the US food aid. In August 1973, the Bangladesh Finance Minister, Tajuddin Ahmed, made a request for food aid in a meeting with the US Secretary of State in Washington. Food import requirements estimated at 2.2 million tons were to be met by commercial imports and food aid from various sources. The United States was requested to provide about 300,000 tons of food aid. I followed it up at a high-level meeting with the USAID in Washington at the end of August 1973, and scaled down our request to 220,000 tons after consultations with the USAID officials. During the same visit, I took up the issue of food aid with the US Secretary of Agriculture, while the

13 At this time, there was a lack of confidence due to widespread perception fed by press reports about corruption, poor law and order situation and violence as well as a general sense of uncertainly regarding the future.

amount of aid was decided by the USAID. While the Secretary, at the time of high world prices, greatly preferred commercial sales to food aid, I tried to plead on behalf of the hungry people of Bangladesh Consultations and discussions both in Washington and Dhaka continued at various levels between the two governments. In January 1974, the Bangladesh Ambassador in Washington again took up the matter with the Assistant Secretary of State.

While frequent contacts between the US and the Bangladesh government continued in Dhaka and Washington, an unexpected message was conveyed on 27th May 1974, by the US Ambassador. By this time price of rice was on a sustained upward trend. The US government had come to know that Bangladesh was selling jute bags to Cuba and under the US PL-480 regulations, food aid could not be provided to any country that was trading with Cuba. My response was as follows: The Jute Corporation of Bangladesh did indeed sell to Cuba 4 million gunny bags for US$5 million as a one-time transaction. There was no long term trade agreement for the sale of jute bags to Cuba and, therefore, Bangladesh was not in a regular business of selling jute bags to Cuba. Secondly, Bangladesh was desperately short of export earnings and was faced with strong competition in the world markets for jute. She was badly in need of taking advantage of any possibility for marketing its principal export i.e. Jute. Thirdly, after all, the Jute Corporation was not aware of this provision of the US law. Fourthly, during the last two years, Bangladesh had received food aid and had singed several food aid agreements with the US government. They had a long list of complicated requirements to be fulfilled by the recipient country as required by the US law. But this particular provision of the PL-480 was never brought to the attention of the government. Fifthly, the request for food aid under discussion had been under negotiations for almost nine months. During this long period no mention was ever made of such a provision. If we had known it earlier, we could have refrained from the sale of jute bags of Cuba.

It was not clear whether this sudden, unexpected bottleneck was the result of an act of negligence on the part of the US bureaucracy. After all, it will well known to the US government that Bangladesh and Cuba had good diplomatic relations and the possibility of their getting into trade relations was high. I discussed this matter almost 30 years later with the concerned US official, who was then the head of the USAID office in Dhaka, now living in Washington, D.C., I asked him why we were not forewarned in 1973 when the request was first made. His reply was that neither he nor his colleagues in Dhaka office were aware of this provision. His counterparts in Washington also did not know or if they knew, did nit care to inform him about such a provision of the US law. He further remarked that there were hundreds of pages of regulations in the US PL-480, all of which few USAID officials could master. This was how the lawyers made their living. Occasional lapses like this did occur. The tragedy was that it occurred in Bangladesh at a time of food crisis.
In any case, the US Ambassador in Dhaka and the US authorities in Washington pointed out that exceptions are granted only in the case of nonstrategic agricultural commodities of non-strategic raw materials for agriculture. Jute, according to them, did not fall into this category. Exceptions could also be granted if the President certified that such aid was in the US national interest and, therefore, sought a waiver from the US Congress. The USAID did not think that the US President could or would make such a case for Bangladesh in this particular instance. It was pointed out to the US government that in the recent past, the two US aid recipients such as Argentina and Brazil had exported cars to Cuba. We were told that the US citizens or the subsidiaries of the US corporations, as was the case in these two countries, could be allowed to trade with Cuba under a special license issued by the Department of Treasury. This was done under the Trading with the Enemy Act. This was unrelated to PL-480 sale, which was a government-to-government transaction in food aid. Under the circumstances, the best that the Bangladesh government could do was to provide an assurance to the US government that she would stop trading with Cuba from that moment onward so that the US could reconsider the grant of food aid.

In the meanwhile, the US Ambassador had formally conveyed its above decision to the Ministry of Foreign Affairs. After all, this involved diplomatic relations and a matter of foreign policy of the government of Bangladesh. The Prime Minister, confronted with this choice agreed to the US proposal, given the magnitude of the food crisis in the country. At the same time, he had the delicate task of conveying such an unpleasant decision to the Cuban government. After all, Cuba was one of the first countries to recognise Bangladesh in January 1972, when very few countries did so, and had sent an Ambassador to Dhaka. At that time, most small countries, both developed and developing, had their Ambassadors stationed in Delhi, concurrently accredited to Dhaka. When the Cuban government was informed by the Prime Minister of his predicament, it was both forthcoming and understanding. It assured Bangladesh that the termination of trade with Cuba by Bangladesh would not affect their relations.

In my capacity, as the Deputy Chairman, I provided the following assurance to the USAID: “The Bangladesh government is aware of the provisions of the US legislation and it does not intend to permit government agencies or government owned corporations to export to Cuba or permit vessels under Bangladesh registry to sail to Cuba ports.” The written assurance from the Bangladesh government as above was provided in July 1974 but agreement for food aid was not signed until much later. Why? The Us Ambassador explained that lawyers in the state Department had made the following determination. Under the US law even though the transaction for export had already been completed sometime in the past and payments had been made by the buyers, Bangladesh was regarded as “currently trading” with Cuba, so long as the jute bags were not physically shipped and had not left the Bangladesh ports. Bangladesh was not on the main shipping routes nor she had “conference lines” ships regularly calling at her ports. It took some time before the shipment was physically off the dock. As shipments started, we requested that since all the requirements of the US law were now met, the food aid agreement was could now be signed without further delays. We were already in the throes of a severe famine. Unfortunately, the Ambassador reported that the lawyers in Washington would like to be assured, before any agreement was signed, that the shipment was completed and the last jute bag had physically left the Bangladesh port. This seemed to us to be the harshest possible interpretation of the law. The last shipment was not completed until October 1974. Agreement was eventually signed more than a year after request for food aid was made to the US government. By that time, the worst days of famine were over and much deprivation had occurred.

Two questions were raised in subsequent years about this phenomenon of the food aid debacle. Why was the government of Bangladesh, when it embarked on the negotiations for food aid, not alert enough to learn in advance all the restrictions that were applicable to the US PL-480 food aid? After all, the planning Commission or the Embassy in Washington should have done all the research necessary for such negotiations so that the US government was not provided with a reason for objective on any ground. As I look back on it, I wonder whether the government had any reason to be so extra careful and vigilant. As described earlier, for two years in the past, Bangladesh had negotiated with and received food aid from the United States and no hint was ever provided of such an eventuality. Numerous consultations at various levels of the US government, including US congressmen, were held and never such an issue was raised.

A second question was raised by some that even if food aid was provided on time, it was not large enough to have provided much relief in view of such a steep rise in price. The facts were as follows: By 8th November 1974, agreement was signed for a total food aid of 200,000 tons of wheat and 50,000 tons of rice under PL-480 Title I. This was in response to the original request for 1973-74. This quantity could have been delivered by late 1973 of early 1974 if there was no Cuban trade bottleneck in the way. By the middle of 1974, a new round of our requests for food aid for 1974-75 was awaiting the US government’s decision. Consideration of this request was delayed because the earlier request for 1973-74 was held up due to the Cuba question. The request for additional US food aid for the year 1974-75 reached as high as 400,000 tons of wheat, bringing the total aid request to the 650,00 tons for a two-year period. If this request was acted upon earlier, i.e. middle of 1974, as it would have been the case in the course of normal circumstances, this would have greatly dampened speculative forces. This could have effectively countered the price rise emanating from the gloomy forecast of Aman crop of January 1975.14, 15 Moreover, the release of stocks as a results in the third quarter of 1974 could have, in all likelihood, moderated the impact of famine.

14 [Brief for the visit of Mr. Parker, UDAID Administrator dated 14 January 1975.]
15 [Minutes of the meeting between Bangladesh Ambassador and US Undersecretary of State, December 1974. By the end of year 1974, the US government was actually considering a grant to Bangladesh ranging from 250,000 tons to 650,000 tons, additional to what was agreed in 1974. If there was any public knowledge that such quantities of additional food aid were even vaguely discussed, this could have made an electrifying impact on price expectations.]

It should be emphasized that the role of food aid under the circumstances was not only to add to the available supplies in the public distribution system but also, much more importantly, to calm the speculative fever. To restore confidence, it was the timing of the injection of additional supplies rather than its quantum that was important. Also, food aid would have enabled the restoration of the distribution of food under the modified rationing and under relief- an avenue predominantly meant for the rural poor. This could have been focused on the areas in distress, specially in the northern districts, and would have affected speculation for the future.

One could argue why the government did not redistribute, whatever meager supplies it had, diverting supplies to the hardest hit rural poor from the urban population, including government employees, both civil and military. The percentage of the total public distribution devoted to modified rationing and relief grants fell from 69 percent in 1972-73 to 42 percent in 1974-75. The absolute amount distribution through these two channels fell from 64,000-85,000 tons during July-September 1974 to 32,000-65,000 tons during October-November 1974, whereas the amount through urban-oriented rationing system fell from 88,000-92,000 tons to 77,000-86,000 tons.16 It was no doubt a failure of public policy not to concentrate on the urban and rural poor at the cost of the urban middle and upper income groups. At the same time, it should not be forgotten that in the urban areas, there were also desperately poor people who were receiving food rations. If, let us say, 50000 to 60000 thousand tons were diverted to the poorest rural areas this would not have provided a great deal of help but given the dire circumstances even a small help would have mattered. I do not recall any proposal by the Ministry of Food to the Cabinet for such redistribution to the most distressed areas/people. The Food Ministry was closely monitoring the price movements as well as the levels of distress and starvation of deaths in different areas. Historically, food distribution in the rural areas was always a second order of priority, after the urban needs were met. The Food Ministry through and acted in the traditional mode, in spite of the exceptional circumstances then prevailing. For that matter, the whole Cabinet through in the same vein. The threat of political and social instability that could be created by the disaffected urban population might have been perceived to be much greater than what could be caused by the poor in distant, deprived areas.

16 Rehman Sobhan, Ibid.
Was there any other alternative way of raising the “entitlements” of the poor i.e. to add to their purchasing power to buy food in the market? In the absence of food distribution, could the government have distributed cash to the most distressed areas/people through the rural works programmes of directly to the destitutes, orphans, and widows? This was a possibility which was not even thought of or conceived at that time. The additional purchasing power of the poor would have enabled them to compete for access to food in the market place. This, no doubt, would have added to the upward pressure on local prices in distant rural areas; nonetheless it might have redistributed some amount of food available in the market towards the poor.

To revert to the case of food aid, it was intriguing to observe how the request for aid led donors to discuss, however cursorily, wider and unrelated issues of concern to them. When the Bangladesh Finance Minister called upon the US Secretary of State in August 1973, primarily to appeal for food aid, the latter spoke, first about the need for countries to develop an efficient agriculture following the example of the United States. In spite of its large production, the US agriculture was hard pressed to meet the demands from so many importing countries at a time of worldwide food shortage. Second, he gave his “occasional advice” for the speedy settlement of disputes with Pakistan. Referring to the proposal of Bangladesh for “war crimes” trials of the Pakistan army, he confirmed that humanity never learned from “war crimes” trials. He appreciated that the Nigerian government was pragmatic in not having “was crimes” trials following the Biafran war and advised that it was “not good to have such trials.” The countries of the subcontinent, in his opinion, should try to work out a solution of their immediate problems and then devote all their attention to their economic and other internal difficulties.17

During the period that the food aid negotiations were under way, an incident was worth recalling. It illustrated how a politician could let his narrow electoral interests influence the provision of food aid, linking his support for aid to the recipients’ compliance with his request. This was the case with Mr. Otto E. Passman, Chairman of the House Appropriation Committee on Foreign Assistance in 1974, who wanted as early as August 1974 a particular US shipping agent to be appointed by the government of Bangladesh, without resort to competitive bidding, for handling the shipment of the US food aid. The agent, he insisted, would no doubt get a “brokerage commission” from the shipping company and would, therefore, not charge a fee from the government for his services. But he conveniently forgot to mention that the shipping charges would reflect the commission that the shippers would have to pay (since there was no free lunch). This was a cost which the government of Bangladesh could have been spared if

17 Minutes of meetings dated August 1973.
the Embassy following its standard practice was to award the contract directly to the most competitive or the cheapest shipper. 18

Mr. Passman was from the rice growing state of Louisiana and was a vigorous promoter of rice export through food aid. He visited Bangladesh during December 1974-Janyary 1975, following his tour of Thailand, the competing rice exporter. He supported food aid in rice rather than in wheat, even though for a given financial allocation of food aid from USAID, a smaller amount of food aid in-kind would be received in view of higher price of rice. On his arrival in Dhaka in the company of his friend- a big rice trader from the state of Louisiana- and having heard in Bangkok that Bangladesh was considering buying rice from Thailand, he met me along with the US Ambassador and his trader friend. He was unhappy that while US was providing food aid to Bangladesh, the latter instead of buying rice from its benefactor country decided to buy it from Thailand. He thought that the linking of the US food aid to Bangladesh’s purchase of rice from USA was a perfectly reasonable quid pro quo, no matter how meager were the financial resources of Bangladesh. This was in spite than of the fact that the import price of rice from Thailand was much lower than that form USA. In fact, he proceeded to demonstrate how beneficial was such a deal for Bangladesh. After all, as an influential member of the US Congress he had supported and to Bangladesh in the past and intended to do more in the future.

The question might be posed as to why no serious food crisis or famine conditions occurred in Bangladesh in some later years, even though there were severe floods and damage to crops. There was a great scare and fear of shortages following crop failures in 1979, 1984, 1988 and 1998. If the speculative fever in 1974, arising from flood damages and expectations of a short fall in Aman crop, led to such spectacular rise in price, why it was not repeated in the later years? Paradoxically, in all these years, whereas in 1974 the reverse had happened i.e. output was larger than in previous years. The answer was that, in all these years, imports (commercial and food aid) were available to dampen speculation.

In 1979, there was a severe incidence of drought during the early months affecting all the three crops. Ex. ante exaggerated fears of crop damage ran very high all throughout, even though crop damage was not quite so high as that in 1974. Yet increase in the price of rice was only 30 percent, as against 100-200 percent in 1974. During 1984 again, there were great fears of crop damage because of several rounds of floods, threatening to reduce four successive crops. In both years, foreign exchange reserves were adequate and food aid climate for Bangladesh was favorable. It was true of both multilateral (WFP/FAO) and bilateral food aid. In 1979, there was an specially favorable response from the most unlikely source

18 See three attachments
i.e. IMF.19 Also, the response was very prompt. There was a change in the international climate, including improved institutional arrangements for rapid response to food emergencies following the lessons of the world food crisis of 1974.

The ability to import food on commercial terms and to obtain generous food aid made it possible to extend very considerably the public distribution system, dampen rise in price as well as relieve distress through a rapid expansion of feeding and food-for-works programme.20 All these factors convinced traders and speculators that the government was able to contain the impact of scarcity by releasing large stocks and expansion of the public distribution system. In none of these two years, i.e. 1979 and 1984, there was, therefore, any significant increase in prices like that in 1974. Speculative hoarding or stockholding was severely discouraged.21 Similar experiences were repeated in 1988 and 1998. The fall in rice output in 1988 in the end was more than it was in 1983-84. There were apprehensions of a great short fall in output and high rise in price. But the rise in price was greatly moderated because of a very large increase in commercial imports, thanks to large foreign exchange reserves that were five times as high as that in 1974. Also, stocks at the beginning of the lean season in 1988 were the highest ever relative to what was usual in the late 1980s permitting a very large increase in the public distribution of food. Again, the crop short fall in 1998 was worse and it was met by a massive increase in imports and this time it was overwhelmingly private imports from India-which were easy and cheap to transport at short notice. By the 1980s and 1990s, there was a significant increase in the relative importance of the irrigated winter crop, i.e. Boro crop-less susceptible to the impact of weather variations. Furthermore, an expansion of wheat output added to the food availability and the diversification of sources of food supply. It reduced the impact of a fall in Aman of Aus crop.

19 There was a stand by agreement with the Fund in that which stipulated a credit ceiling for government borrowing. Heavy government borrowing from the Central Bank to finance its commercial imports violated the ceiling but the IMF did not raise any problem even though in the next year, i.e. 1980, it did object.

20 Osmani, Ibid
21 Osmani, Ibid