Unstable daily essentials’ market

There has been extensive damage to agricultural produce from the floods in the eastern parts of the country in mid-August. In this condition, import of goods should have increased than usual to meet this scarcity. But the traders have cut down on the import of daily essentials alleging the lack of a favourable trade environment. As a result the prices of daily essentials keep rising.

Traders involved with the import of goods say that on one hand the political situation of the country has caused a trade slump, while on the other hand, the price hike in the global market has put them at risk.

In this condition there are uncertainties in case of getting the investment back from importing goods at a higher price. So, despite there being demand they are not going for the import of daily commodities in an adequate amount.

According to National Board of Revenue (NBR) records, the import of daily essentials like edible oil, sugar and onion has dropped in the two months (August-September) after the fall of the Awami League Government. The prices of these commodities are also on the rise in the global market. As a result, there looms a risk of shortage for these commodities ahead if the supply does not increase.

The reduction in import has created a pressure on the supply of daily commodities, which in turn has increased the prices of commodities like flour, soybean oil, palm oil and onions.

According to the Trading Corporation of Bangladesh (TCB) records, the prices of these commodities have increased by 1 to 4.5 per cent in just one week. 

The price of sugar has decreased by Tk 3 per kg from the duty tax being slashed, whereas duty worth more or less Tk 11 has been reduced per kg of sugar. Low supply of sugar is the main reason for this.

People’s cost of living had increased due to the price hike of daily commodities during the last government’s tenure.

The Awami League government fell in the face of student-people uprising on 5 August. Since then, the prices of daily commodities didn’t decrease, rather increased in the last two months under the rule of the interim government.

Prothom Alo spoke to five top and mid-level importers on the issue of the import going down. They stated that there is an impression of slump in trade because of the chaos in the beginning of the term of the interim government. They took time to observe the situation.

They are not receiving any guidelines from the government either in this changed situation. Besides, the issues regarding the application for letter of credit (LC) in importing consumer items has not been settled completely yet. As a result the supply of import-dependent goods is decreasing.

When asked about the reason for the decline in import, a representative of Bangladesh Vegetable Oil Refiners and Vanaspati Manufacturers Association, on condition of anonymity told Prothom Alo that several letters have been sent to the relevant authorities of the government, including the adviser for finance and commerce ministry, from the organisation so far as the price of palm oil keeps increasing in the global market. 

Lastly, a letter was sent to the adviser on 6 October. The letter highlighted the lack of progress on the matter of price adjustment as there has been price hike in the global market. That is why the traders are suffering from indecision in the case of opening LCs. But the traders have been discouraged to import for not receiving any guidelines from the government, it added.

Executive director of daily commodity importing company Seacom Group, Amirul Haque, told Prothom Alo that before opening LCs to import a commodity, the traders calculate how much it will cost to import the good into the country and what’s the price of that in the local market.

The current price of daily commodities in the global market is higher compared to that in the local market. Meanwhile, the bank interest rate has increased as well. In this condition, a decline in investment in consumer items is normal.

NBR records show that the import of unrefined sugar, the raw material for sugar, has declined the most among all the daily essentials.

After the interim government took charge, a total of 200,000 tonnes of sugar was imported in August and September. The amount was 328,000 tonnes during the same time last year. That means, the import has declined by 37 per cent year on year.

The import of palm oil has decreased as well. Though the import of soybean oil increased a bit, the total import of both the edible oils is less compared to the demand.

As per NBR records, a total of 349,000 tonnes of these two types of edible oil have been imported in the last August and September. During the same time last year, the import was 376,000 tonnes. That means the import has seen a 7 per cent slump. 

The demand of another daily essential, onion also has to be met through import.

As much as 94,000 tonnes of onion was imported in August and September, while the import was 230,000 tonnes at the same time last year. There has been a steep 59 per cent decline in the import of this.

However, the import of wheat has not declined though. A total of 1.75 million tonnes of wheat has been imported in the two months. Meanwhile, 1.7 million tonnes of wheat was imported at the same time last year. Among all the daily essentials, there has been a significant rise in the import of lentils. 

A total of 119,000 tonnes of lentil has been imported in the last two months, the import of which was just 37,000 tonnes in the same time last year.

According to this record, the import of lentils has more than doubled this year. Basically, a major portion of the LCs for commodities that have been imported during the last two months had been opened earlier.

However, Meghna Group of Industries (MGI) chairman Mostafa Kamal told Prothom Alo, “The import of daily essentials has declined a bit due to the demand being dropped.  Meanwhile, the main reason behind the decline in sugar import was the increase in smuggling of sugar. However, the smuggling has declined a little now. So, we are increasing the import again.”

Of the daily essentials, the price of palm oil has increased the most. According to TCB records, the price of loose palm oil was Tk 125-135 per litre before the fall of the Awami League government. It was sold at Tk 144-145 per litre this Saturday, an increase by Tk 10-19 per litre.

Among all the edible oils, palm oil is used the most. The hike in the price of this oil is augmenting the sufferings of the low income population. Plus, the cost of production for goods in the food industry is increasing as well.

Alongside palm oil, the price of soybean oil has also increased by Tk 7 per litre. Soybean oil sold for Tk 144-145 per litre on 4 August. After an increase of minimum Tk 1 to maximum 7, the price has now risen to Tk 152-156 per litre.

The price of onions was also somewhat stable. A kg of imported onion sold for Tk 100-105 on 4 August. However, the price of onions has also increased now. According to TCB, onions are selling for Tk 105-110 per kg now.

Meanwhile, TCB records show that the price of packaged flour has increased by 3.7 per cent within the difference of a week.

However the price of wheat flour remains the same as before. The price of sugar had increased by Tk 3 per kg. However, the price has decreased and stays stable at the same rate from 4 august due to the reduction in duty tax.

The government is adopting various steps to control the price of daily essentials. Lastly, the regulatory duty on sugar import has been reduced by 15 per cent. From that the duty tax on importing unrefined sugar will be reduced by Tk 11.18 per kg, stated the NBR. 

There used to be a duty tax of Tk 38-42 on importing per kg of sugar. Now, the importers will have to pay Tk 27-31 only. The duty tax on edible oil had already been decreased before. Yet, a duty tax of Tk 17-18 has to be paid on per kg.

Researchers, however, have emphasised on increasing supply rather than reducing duty tax to keep the prices of import-dependent commodities under control. They believe the crisis won’t be diffused unless the supply increases.

Research director at CPD Khondaker Golam Moazzem told Prothom Alo that the flood in August has damaged the crops. That has created a pressure on the internal production. The pressure on import goods will be increased as well. The shortage will widen if there’s a decrease in import under this condition.

It won’t be possible to handle the situation with market management like reducing duty tax alone. In addition to encouraging the private sector, the government has to take preparations for import as well. Otherwise there will remain the risk of a food crisis, he added.

Golam Moazzem believes the commerce, agriculture and food ministries should take joint steps by estimating the figures of production and demand. Then it will be possible to confirm what will be the amount of deficit and how that can be dealt with.