J. Sci. Technol. (Dinajpur) Vol.

7: pp--- (2009)
ISSN 1994-0386
Rice husk briquette producer

SUPPLY AND VALUE CHAIN ANALYSIS OF RICE MILL

M.S. Kabir1, MRA Mamun2, MM Alam3, MM Islam4 and S. Hossen5

ABSTRACT
The objectives of the study were to identify the present status of rice milling in Bangladesh,
supply and value chain of automatic and semi-automatic rice mills, the constraints of rice mills
especially in supply and value chains and recommend priority areas of supply and value chain for
interventions. Based on the growth and concentration, Dinajpur was selected as study site. The
numbers of Traditional rice hullers, Husking rice mills, Semi-automatic rice mills and Automatic
rice mills are 100000, 14139, 457 and 142, respectively. There are three distinct channels of
supply chain in rice mill sub-sector. The channels are imported machinery channel, rice mill
equipment production channel and rice processing channel. The total market size of rice milling is
Taka 64854 million employing 0.26 million labour forces. In automatic rice mills, the profit
margins in rice milling are estimated as Taka 768 and Taka 1105 per ton of milling whole paddy
for parboiled and aromatic rice, respectively. In semi-automatic rice mills, the profit margin for
per ton of aromatic rice milling is found as Taka 920. The rice milling sub-sector has great
potential to modernize and to add valuable contribution in loss saving, quality milled rice
production and employment generation.

Key words: Supply chain, Value chain, Rice mill

INTRODUCTION

Rice is the dominant crop and largely determines the rate of progress in the agriculture sector
including non-crop agriculture sub-sectors. The huge quantity of paddy, produced in the country, is
largely processed to clean rice by different types of mechanized rice mills, popularly known as
Engelberg, Major and Automatic rice mills, having different capacities are spreading through the
country. Besides, house hold level processing can also be found in rural communities. Pounding of
paddy in a mortar with a pestle by hand or using Dheki is the traditional milling process mostly used
in case of small quantities of rice milling mainly aromatic or fine rice. The milling outturn (67-70%)
of traditional village milling process is quite impressive in comparison to modern rice milling. Milling
is a crucial step in post-harvest processing of rice. The basic objective of a rice milling system is to
remove the husk and the bran layers, and produce an edible, white rice kernel that is sufficiently milled
and free of impurities. Most rice varieties are composed of roughly 20% rice hull, 11% bran layers,
and 69% starchy endosperm, also referred to as the total milled rice. Total milled rice contains whole
grains or head rice and broken. The by-products in rice milling are rice hull, rice germ and bran layers,
and fine broken. (Farouk et al. 2002)

The mechanical process of modern rice milling is consists of: pre-cleaning, husking, husk aspiration,
paddy separation and de-stoning, whitening, polishing, shifting, length grading, blending, weighing
and bagging. Losses in the milling process are caused by poor technical performance of milling
machinery, resulting in poor milling yields. Engelburg type steel hullers have been eliminated from
different countries as it breaks the grain in the milling process and yields only 53% milled rice.
However, in Bangladesh, the Engelburg type steel rice hullers are still predominant in rice milling. At
1&4
Lecturer, Dept. of Agricultural and Industrial Engineering, 2Lecturer, Dept of Farm power and
Machinery, SAU, Sylhet, 3Professor, Dept. of Farm power and Machinery, BAU, Mymensingh,
Bangladesh, 5USI Extension Officer, Micronutrient Initiative (MI), Bangladesh
present, about 95% milling is done by Engelburg steel huller in Bangladesh and at least 2 % rice is lost
due to use of Engelburg steel hullers (Ali, 2002). The conversion of Engelburg rice huller to rubber
roll sheller could save 2-4% of whole rice loss with no broken rice. Considering milling of about 27
million tons of paddy annually could save 0.648 million tons of milled rice, i.e. almost quarter of the
total whole rice deficit of the country. Use of rubber-roll hullers also produces good quality rice and
rice byproducts that can be sold at higher prices. Thus the study was undertaken to identify the present
status of rice milling in Bangladesh, the supply and value chains of automatic and semi-automatic rice
mills, the constraints of rice mills especially in supply and value chains, and to recommend priority
areas of supply and value chains for intervention.

MATERIALS AND METHODS

Rice mills in Bangladesh consist of traditional, husking, semi-automatic and automatic rice mills.
Depending on the capacity and quality of production, semi-automatic and automatic rice mills were
selected for this study. The study was based on the field survey where primary data were collected for
identification of supply and value chains and estimation of value addition at each level by means of
personal interview of the actors of the supply and value chains.

Selection of the Study Site: Based on the growth and concentration, Dinajpur is known as the quality
rice producing area and a significant number of small to large rice mills are located in this region.
Considering the resource and time limitation selected rice mills of Dinajpur area have been included in
the study for in-depth analysis.

Sampling Units: Key Informants, Actors in the Supply and Value chain, Service providers
(commercial and embedded)

Sampling Technique: A combination of both Non-probabilistic Stratified Random Sampling and

Cluster Sampling techniques were followed.

Sample Distribution: Processors or millers are the key players who primarily convert paddy into rice
by mechanical processing. Various categories of rice mills were selected on the basis of operation,
sources of power, and capacity of milling, initial investment of mills, technical parameters and
processing technique.

Survey Questionnaire: The survey questionnaires were prepared according to the objectives of the
study with active consultation with the key informants, expert from the relevant fields and secondary
information.

Table 1. Distribution of respondent in the study area

Actor/Informant Number of respondents
Paddy trader 06
Paddy Arotder 08
Processor/Rice mill owner 12
Wholesaler/Rice Arotder 08
Retailers 06
Rice mill equipment manufacturer 05
Demand side of BDS 04
BDS provider 02
Sub-total 51
Key informant 01
Total 52
Data collection method: Data were collected through personal interview.

Estimation of Economic Parameters:

Cost determination and analysis: In this study economic profitability of rice processing in rice mills
was determined based on economic analysis considering the fixed and variable costs involved in rice
milling.

Fixed costs in rice milling:

The fixed costs in rice milling include:
a) Annual depreciation cost of machinery
b) Yearly interest on investment for machinery
c) Tax on machinery
d) Yearly insurance cost of machinery
e) Yearly fixed cost for land use
f) Annual depreciation cost of buildings/infrastructure
g) Yearly interest on investment for buildings/infrastructure

Annual depreciation costs in (a) and (f) were calculated as

Annual depreciation cost, D = (P-S)/L
Where, P = purchase price, Tk,
S = salvage value, Tk
L =Useful life, yr

Interest on investments in (b) (g) were calculated as

Interest on investment, I= [(P+S)/2] × i
Where, i=Interest rate

Tax on machinery, as in (c), was assumed to be 1.4% and insurance cost of machinery, as in (d) was
taken as 0.25% of purchase price

Therefore, Total fixed cost in rice milling, FC = (a) + (b) + (c) + (d) + (e) + (f) + (g)

Variable costs in rice milling:

Variable costs per year in rice milling include:
h) Labour cost
i) Repair and maintenance cost
j) Cost of electricity
k) Management cost (Stuff salary)
l) Tax
Total variable cost in rice milling is, therefore, VC = (h) + (i) + (j) + (k) + (l)

The cost of fuel for parboiling is not included as because the millers produce rice husks in their rice
mills, which are adequate for fueling the boilers and they do not spend extra money for fuel.

Annual operating cost, AOC (Tk/yr), was calculated as

AOC =FC+VC

Hourly operating cost of rice mill, HOC, was calculated as

Hourly operating cost, HOC= Annual operating cost (Tk./yr) divided by hours of use of the rice mill
per year(hr/yr)

Milling cost per tonne of paddy was calculated as

Milling cost per tonne of paddy (Tk/t) = Annual operating cost (Tk/yr) ÷ Tonne of paddy processed
per year (t/yr).
RESULTS AND DISCUSSION

Present status of rice milling in Bangladesh: The rice mills under the Department of Food are
generally classified as Husking rice mills, Major rice mills (semi-automatic) and Automatic rice mills,
and the numbers is shown in Table 2 with a fortnight capacity of 6,25,600 million tons (DOF, 2007).
In addition there are about 1, 00,000 traditional Engelburg type rice huller in the country. There are
about 42 automatic, 30 semi-automatic and 1582 registered husking mills are operating in Dinajpur
district (DOF, 2007). Among rice milling installations about 95 percent are using Engelburg type steel
huller, which incurred a significant loss of rice and rice byproducts. The existing market sizes of
husking, semi-automatic and automatic rice mills are estimated as Taka 19795, 27420 and 11360
million, respectively. Automatic and semi-automatic rice mills produce aromatic rice, which are now
exported to a limited quantity.

Table 2. Present number of rice mills and their capacities

Rice Mills No. of Mills Volume of business, M Capacity utilization (%)
Tk
Husking (registered) 14239 19,795 18
Husking (non-registered) 1,00,000 1170 33
Semi-automatic 457 27420 30
Automatic 142 11360 60
Milling of rice is a labour intensive task. The number of labourer employed in traditional, husking,
semi-automatic and automatic rice mills are shown in Table 3

Table 3. Types of rice mills and employment

Type of rice mill No. of rice mill Employment/unit Total
employment
Husking (registered) 14139 10 1,41,390
Husking (non-registered) 1,00,000 1 1,00,000
Semi-automatic 457 30 13,710
Automatic 142 44 6,248
Total employment 2,61,348

Supply Chain of Rice Mill: There are three channels of supply chain in rice mills. The channels are
Imported machinery channel, Rice mill equipment production channel, Rice processing channel. There
are two supply channels of machines and equipment for all categories of rice mills. One is imported
machinery channel and the other is locally produced machine and equipment channel. Earlier, almost
all machines and equipment for rice mills were imported from abroad especially from India and China.
However, in recent time 3 manufacturers at Dinajpur and 1 manufacturer (polisher) at Bogra are
manufacturing most of the equipments such as dryer, sheller, polisher, grader etc. Boilers for the rice
mills are still imported from abroad, as there is no such industry in the country. A common supply
chain of rice mills is shown in Figure 1.

Imported machinery channel: This channel consists of Dhaka based importers. The importers
usually imports about 30% of machinery and equipment (rice polisher, motor, gear box, belt etc)
required by the semi-automatic rice mills and supply it to them on demand. Rest of machines and
equipments are manufactured locally. In case of automatic rice mill, about 30% of machinery and
equipment (boiler, dryer, huller, paddy separator, polisher, sheller, heater, motor etc.) is supplied to
auto rice mill owners. Rest of the machines and equipments are manufactured locally.

Rice mill equipment production channel: This channel consists of raw materials importers (Dhaka),
imports pig iron, hard coke, silicon, ship breaking scrap etc and supply about 25% to the rice mill
equipment manufacturers (Boil rice polisher) and they supply about 5% equipment to the rice mill
owner. The traders of these raw materials supply about 25% to the manufacturers of paddy separator,
dryer, sheller, heater etc. of automatic rice mill. The raw material traders of semi-automatic rice mills
supply about 15% of raw materials to the local equipment manufacturer and about 70% is supplied to
the local manufacturer of semi-auto rice mill owners.

Rice processing channel: The channel involves farmers, arotdar/commission agents, rice mills,
wholesalers and retailers. The farmers generally sell their paddy in the local market and it is bought by
the paddy-traders and they in turn sell the paddy to the processors or rice millers. The processors and
wholesalers also have their appointed agents to buy paddy on behalf of them. The large processors
themselves are usually engaged in the paddy trading thus creating an overall control over rice market
from paddy trading to wholesaling. However, the paddy wholesalers are the key players to supply
paddy to the processors having high processing capacity. Mostly the larger auto rice millers generally
have multiple sources of purchase points to meet their high milling capacity. Relatively smaller
capacity husking millers buy paddy from local traders and other sources e.g. farmers/growers,

Market: Tk. 64845M

Retailing Retailer: Rice

Wholesaling Wholesaler: Rice

Processing Rice Mill: Auto / Semi –auto mills

Manufacturer: J. Sci. Technol. (Dinajpur) Vol. 7

Manufacturing Drier, Sheller,
Technol. (Dinajpur) Vol. 7: pp---
Separator, Polisher
(Dinajpur) Vol. 7: pp--- (2009)
Commissioning Broker: Second
Vol. 7: pp--- (2009)
hand boiler - (2009)agent
Arotdar/ Commission
remodeling ISSN 1994-0386
0386
Trading Trader: Iron scrap, Ship breaking scrap, Rice Rice husk briquette p
Pig iron, hard coke, Silicon etc. farmer briquette prod
producer
Importer: Boiler,
Importing drier, miller, separator, Importer: Pig iron, hard coke,
polisher, motor, spare Silicon, Ship breaking scrap etc
parts etc.

Channel 1: Imported Channel 2: Rice mill Channel 3: Rice

machinery channel, equipment production processing channel,
Tk. 5000 M channel, Tk. 100 M Tk. 59745 M

Figure 1. Supply Chain of Rice mill (Auto/Semi-auto mills)

 Broken Rice Bran Husk Processing
Tk.172 Tk.472 Tk. 160 Tk.560
12.61 % 34.6 % 11.74 % 41.05%
Price of Wholesaler/ Transport Retailer Retail price of
Paddy Rice arotdar Tk.687.5 Tk.312.5 rice from one
Trans Tk.250 22.55% 10.25% ton of paddy
Tk. 16,875/ton Commiss Transp Rice
ort port 8.20 % Tk.19, 924
ion agent Miller
Tk. 160 Tk.12
Tk.150 Tk.1364
5.25%
5
(4.92 %) 44.73%
4.09%

VARIABLE FIXED NET

COSTS COSTS PROFIT
Tk.522 Tk.73.65 Tk. 768.35
(38.27%)
5.4% 56.33%

Labour R &M Managemen Electricity Taxes

Tk.140.5 Tk.80 t Tk. 208 Tk. 20.8
26.91 15.32% Tk.72.8 39.85 % 3.98
13.94 %
% %

Machinery Land User Building

Costs Costs Costs
Tk. 62.98 Tk.4.67 Tk.6.0
85.51 % 6.34 % 8.15%

Milling Drying Boiling Pre-

Section Section Section cleaning
Tk.21.7 Tk.13.2 Tk.26.4 Section
41.92 % Tk. 1.68
34.46 % 20.96 % 2.66%

Figure 2. Value chain (value addition) of Automatic rice mill (parboiled rice)
Broken Rice Bran Husk Processing
Tk.169.5 Tk.893 Tk.175 Tk.416.5
10.25 % 53.99 % 10.58 % 25.18%
Commission Rice Miller Transport Wholesaler / Transport Retailer
Retail
Price agent
of Transp Tk.1654 Rice arotdar Tk.687.5 Tk.412.5
price of
Tk.150
paddy ort Tk.125
48.09% Tk.250 19.99% rice
11.99%
Tk. 4.36 % Tk. 3.64%
7.27% from one
32,500/ton 160 ton of
paddy
4.65% VARIABLE FIXED COSTS NET PROFIT Tk.35,
COSTS Tk.47.25 (2.85%) 939
Tk. 1105.15 (66.82%)
Tk.501.6
(30.33 %)

Labour R &M Management Taxes

Tk.120 Tk.80 Tk.72.8 Electricity Tk.
23.92% 15.95% 14.52 % Tk. 208 20.8
41.46Machinery
% 4.15 %
Costs Land User Costs Building
Tk.36.58 Tk.4.67 Costs
77.41% 9.88% Tk.6.0
12.69%
Milling Drying Pre-
Section Section cleaning
Tk.21.7 Tk.13.2 Section
36.08 % Tk. 1.68
Figure 3. Value Chain (value
59.32%addition) of Automatic
4.59 Rice mill (Aromatic rice)
%
 Broken Rice Bran Husk Processing
Tk.169.5 Tk.893 Tk.175 Tk.416.5
10.25 % 53.99 % 10.58 % 25.18%
Retail price
Commission
Price of Wholesaler/ Transpor of rice from
agent / Rice Transpor Rice Transpor Retailer
paddy t Rice arotdar t one ton of
arotdar t Miller Tk.412.
Tk.32, Tk.250 Tk.687.5 paddy
Tk.150 Tk. 160 Tk.1654 Tk.125 5
500/ton 7.27% 19.99% Tk.35, 939
(4.36%) 4.65% 48.09% 3.64% 11.99%

VARIABLE COSTS FIXED COSTS NET PROFIT

Tk.669.67 Tk.64.78 Tk. 919.55
40.48% 3.92% 55.6%

Labour R &M Management Electricity Taxes

Tk.145 Tk.66.67 Tk.84 Tk. 340 Tk.34
21.65% 9.96% 12.55% 50.77 % 5.07 %

Machinery Land User Building Costs

Costs Costs Tk.12.0
Tk.44.44 Tk.8.34 18.53%
68.6% 12.87%
Milling Drying Pre-cleaning
Section Section Section
Tk. 14.84 Tk.27.5 Tk.2.1
33.39% 61.88% 4.73%

Figure 4. Value Chain (value addition) of Semi-automatic Rice mill (Aromatic rice)

In semi-automatic rice mills, rice milling (48.09%), transport (19.99%), retailing (11.99%) and
wholesaling (7.27%) constitute the major value addition (Figure 4) for aromatic rice. The profit
margins are Taka 919.55 (55.6% of value addition at this level) for aromatic rice. The lower profit
margins registered for semi-automatic rice mills are because of the low capacity utilization, which is
about 15% compared to 60% for automatic rice mills.

In case of parboiled rice and aromatic rice the profit margins per ton rice mills are found Taka 768 and
1105, respectively. In case of semi-automatic rice mills the average profit margin for aromatic rice is
found Taka 920. The variation in profit margins is because of processing cost in various types of rice
mills. Moreover, high capacity and capacity utilization of automatic rice mills provide an edge over
processing cost of rice in husking and semi-automatic rice mills.
intermediaries, etc. Commission agents have the trading arrangement with the large auto rice mills and
buy rice on commission basis for them. In case of automatic rice mills about 50% milled rice is
supplied to the rice arotdar/ wholesaler, 10% to the government godown, 20% to the rice retailers for
the market. About 50% of the rice husk is supplied to the rice husk briquette producers and rest 50% is
supplied to the rice husk retailers. In case of semi-automatic rice mill about 70% rice is supplied to the
rice arotdar/ wholesaler, 10% to the government godown, 20% to the rice retailers for the market. The
marketing channels indicate that wholesalers/arotdars play the pivotal role in milled rice marketing
and control the supply of rice in the retailers market.

Value Chain Analysis: In automatic rice mills, rice milling (44.73%), transport (22.55%), retailing
(10.25%) and wholesaling (8.20%) constitute the major value addition (Figure 2) for parboiled rice.
For aromatic rice the major value additions are rice milling (48.09%), transport (19.99%), retailing
(11.99%) and wholesaling (7.27%) (Figure 3). The profit margins at rice millers’ level are estimated as
Taka 768.35 (56.33% of value addition at this level) and Taka 1105.15 (66.82% of value addition at
this level) for parboiled and aromatic rice, respectively. Parboiled rice milling requires boilers for
parboiling of paddy which incurred about 5% of value addition as fixed cost compared to 3% fixed
cost for aromatic rice. This additional cost is incurred because of the boiler, which adds an amount of
Tk. 26/ton of milled rice.

Constraints of Rice Mills in Supply and Value Chains: The major constraints of the sub-sectors
along with Business Development Service (BDS) provisions and potential service providers are
summarized in the Table 4.

Table 4: The major constraints of the sub-sectors

Pri Constraints Business Development Service Providers
ori Services
ty
Ar
ea
s
 Lack of skill at rice mill Provisions for training on Poly Technique Institute (PTI),
SKILL DEVELOPMENT

and workshop level: operation, maintenance and Technical School & College
Operation, maintenance repair of rice mill to operators (TSC), Apprenticeship at rice
and repair skill (rice and technicians. mills (Embedded),
SERVICE

mill); Technical skill Apprenticeship at workshops

(for fabrication of rice (Embedded), Senior mechanics
mill equipment); (Embedded)
Management skill Provisions for training on Private training institutes, Private
(business management, management, accounting and enterprises
accounting & marketing skill to management (Rice mills) can provide training
marketing). personnel. beside its production line.
 Lack of access to export Provisions for easy access to Private sector exporters
INFORMATION SERVICE

market for aromatic rice. export market for aromatic rice (Embedded)
to rice mills.
 Loss of rice due to Provisions for access to Bangladesh Agricultural
inappropriate knowledge and skill to replace University (BAU), Bangladesh
technology at rice mills. engelburg huller by rubber roll Rice Research Institute (BRRI),
huller to husking and traditional PRAN (Transacted), Intermediate
rice mill owners Technology Development Group
(ITDG), Large Machinery
Suppliers (Embedded), Rice mill
associations
 Lack of knowledge and Provisions for legislation to Private enterprise can provide
ADVOCACY

skill to replace replace engelburg huller by technical service to replace

POLICY

engelburg huller by
rubber roll huller.
 Lack of steady supply of
electricity.
rubber roll huller of husking
and traditional rice mills.
Provisions of non-interrupted
supply of electricity to
producers and sellers.
engelburg huller by rubber roll
huller.
Power Development Board (PDB)
Palli Biddyut Samati (PBS)
 CONCLUSIONS

Based on the findings the following priority Business Development Services (BDS) are
recommended for further intervention: Developing skills at rice mill and workshop level related to
Operation, maintenance and repair skill (rice mill), Technical skill (for fabrication of rice mill
equipment), Management skill (business management, accounting and marketing); Developing
management, accounting and marketing skill to management personnel; Facilitating easy access to
export market for aromatic rice to rice millers; Access to information, knowledge and skill to
replace engelburg huller by rubber roll huller to rice mill owners; Enacting legislation to replace
Engelburg rice huller by rubber roll huller to husking and traditional rice huller owners; Policy
options on non-interrupted supply of electricity to producers and sellers.

REFERENCES

Alam MM. 2005. ‘Identification of Agri-machinery SMEs and Service Providers, and Sub-
sector Supply and Value Chain Analysis’; draft report for the South Asia Enterprise
Development Facilities (SEDF), United House, 10 Gulsan Avenue, Dhaka-1212
Ali,M.M. 2002. Rice milling in Bangladesh.
Farouk SM and Zaman MA. 2002. Improvement of Skill and Work Environment of Landless
Wage Earners engaged in rice processing system of Bangladesh. A project report submitted
to the Research and Extension in Farm power Issues (REFPI), Department of Farm Power
and machinery, BAU, Mymensingh
Department of Food. 2007. Director General Directorate, Government of the People's Republic of
Bangladesh, 16, Abdul Gani Road, Dhaka-1000, Bangladesh