Global prices fall, no impact on local market woes
Bangladesh Trade and Tariff Commission (BTTC), under the Ministry of Commerce, shows the price of unrefined soybean oil in Argentina was USD 847 per tonne on 31 May. The price was USD 1970 dollars exactly a year ago. The price has dropped by nearly 57 per cent.
A bottle of soybean oil in the country's market went up to Tk 199 after it had been increased by Tk 12 per litre on 3 May. The price hike was caused by the withdrawal of exemption of value added tax (VAT) on soybean oil. The prices stood at 2.5 per cent less than a year ago after the spike in price.
It appears that even if the price of soybean oil has dropped by half in the world market, it did not bring any relief to Bangladesh markets. Not just soybean oil, they price remains unaffected by price decline in global market for other essentials including coarse wheat, lentils, fuel oil and natural gas.
Businessmen say that despite the price drop in the global market, the overall cost has not decreased much. Besides, the price of dollar has spiked in the country. Increase in gas and electricity prices has increased production costs. The surge in fuel prices has also escalated the cost of transportation.
Meanwhile, economists noted that the tendency to put the blame on global market for high inflation in the country has lost ground. Rather, inflation is now increasing due to domestic factors. As the government has failed to control the price of the dollar, it has fuelled inflation by raising the prices of gas, electricity and fuel. Fuel oil and gas prices are declining in the international market, but the price in the country remained unabated. Rather, the government is making profit by removing the subsidy completely from this sector.
Ahsan H Mansur, executive director of Policy Research Institute (PRI), told Prothom Alo that there is no point in blaming the international market anymore. Inflation in the country is now caused by the appreciation of the dollar, disruption of imports due to the crisis and rising production costs in local level.
How much have prices fallen in the global market?
The Russia-Ukraine war broke out in late February 2022. The price of various products in the world market skyrocketed. Due to this, the import cost of Bangladesh went up. Foreign exchange reserves continue to deplete. The price of the dollar rose from Tk 86 to Tk 108. However, the prices in global market started to fall now.
The Tariff Commission analyses the price in the international market and regularly submits a report to various government ministries. According to the 31 May report, the price of unrefined soybean oil has dropped by 57 per cent, the price of palm oil has decreased by 53 per cent, the price of wheat by 39 per cent, the price of lentils by 25 per cent and the price of onion by 82 per cent compared to the prices a year ago.
According to the Trading Corporation of Bangladesh (TCB), also under the Ministry of Commerce, the price of unpackaged flour is about 15 per cent and packet flour is 22 per cent higher than the price a year ago. Coarse lentil prices fell by about 12 per cent which brought a little relief.
The price of sugar has increased in the global market. The growth rate is a little over 33 per cent in one year whereas the price increased by 61 per cent in the country. There was special duty exemption on sugar till 31 May, which has been lifted. There has been no mention of duty exemption on sugar in the new budget as well.
Notably, import duty of Tk 3,000 per tonne, 30 per cent regulatory duty, 15 per cent value added tax (VAT) and 3 per cent advance tax are imposed on the import of unrefined sugar. The import duty of Tk 3000 was lifted in February keeping the demand during Ramadan in mind. The regulatory duty was also reduced by 5 per cent. These exemptions have been removed now.
Traders said that they have to pay a total tax of Tk 42 on one kg of sugar now. In bottled soybean oil it is Tk 24. Traders said they would propose to raise the price of sugar similarly as prices of soybean oil rose last month after the withdrawal of tax. They say that the cost has increased by Tk 7 per kg due to the removal of duty exemption.
Biswajit Saha, director of City Group, a leading company that refines edible oil and sugar, told Prothom Alo that the proposal to adjust price will be placed soon according to the new tariff structure.
However, the price fixed by the government after analysing the cost of sugar was not followed. In early May, the government fixed the price of unpackaged sugar at Tk 104 per kg while it was sold at Tk 130 to 135.
The price of onion has shot up by 55 per cent to Tk 75-80 per kg within a month. During this period, prices in India hiked by about 29 per cent. However, onion prices are very low in India. According to the Tariff Commission, the wholesale price per kg is Rs.13. Bangladesh does not allow onion import. Ministers and secretaries have threatened to lift various import restrictions which was not implemented though.
The maximum price fall was seen in palm oil price. The price of unrefined palm oil in the global market has dropped by 53 per cent compared to that of a year ago. The price fell in the country's market by nearly 20 per cent.
The price of rice has declined in the market. Halim Sarkar, the owner of a large grocery store in West Sheorapara of the capital, said that the price of fine miniket rice reduced by Tk 4 to 5 per kg due to the increase in rice supply in the new Boro season. He said, the price of everything has gone up exorbitantly compared to that of a year ago. But the price of rice is falling. No other commodity prices have fallen.
However, the rate at which the price of rice decreased during Boro season is not seen this time. According to TCB accounts, the price of coarse and medium rice has decreased by 2 per cent in a month.
Cost of industrial raw materials
The price of industrial raw materials has also dropped in the global market. But the price of daily use products like soap, toothpaste, tissue paper has not decreased in the market of the country.
An official of a leading company in the fast moving consumer goods (FMCG) sector told Prothom Alo on the condition of anonymity that the price of 'soap cake', the main raw material of soap, has increased from USD 800 to USD 2200 per tonne. It again came down to USD 1000.
But the benefit of this price fall could not be used for three reasons-first, addition price is charged while calculating customs duty, second, due to the increase in the price of raw materials, the price of soap could not be increased as much as it needed to be. Most of the companies went into loss. They are now increasing the price to recover. 3. Production costs in the country have also increased considerably.
Energy ministry and Bangladesh Energy Regulatory Commission (BERC) fix the price of fuel oil and gas. Generally, the government offers subsidy on the price of gas, electricity and fuel oil. Because, if the prices of gas, power or fuel oil increase, the rate of inflation increases leading to the industrial sector’s inability to compete. For this reason, energy is considered as a strategic commodity. The government also deals with these businesses.
According to the World Bank, compared to the average price in April to June last year, crude oil prices fell by about 33 per cent in May this year. The government in the country has not yet reduced the price, rather it has been collecting taxes at a high rate.
Centre for Policy Dialogue (CPD) in a review on the economy said on 27 May that there is an opportunity to reduce the price of fuel oil including octane, petrol and diesel at the consumer level by Tk 5 to 10 per litre. BPC is now making profit.
In the proposed budget for the fiscal 2023-24, two types of duty and tax on fuel oil have been lifted. However, two officials of Bangladesh Petroleum Corporation (BPC) believe that there is no hope of reducing the cost in the tax structure proposed in the budget.
Of the total gas supply, 15 to 20 per cent is imported. The price of liquefied natural gas in the world market rose above USD 60 per million metric British thermal units (MMBTU). The government hiked gas prices by 82 per cent in January. Now gas prices are down to around USD 15. But the government did not adjust the price of gas, nor is it able to alleviate the crisis in the industry. People across the country are experiencing load shedding due to shortage of gas and coal.
According to the World Bank, the price of gas per MMBTU in supply to Europe during April to June last year was around USD 32. The average price for the next three months rose to USD 60 which is now down to USD 10.
Consumers Association Bangladesh (CAB) senior vice-president and energy expert M Shamsul Alam told Prothom Alo that reducing the price of fuel in the country does not bring any benefit. So a fund for price stabilisation should be made with current profits. He suggested that the energy sector undergoes reform for the welfare of people.
"We couldn’t, we can't in future too"
India's inflation rate has dropped to 4.7 per cent in April. It is expected to go down further in the May. The rate of inflation has decreased a lot in the United States and European countries. Pakistan and Sri Lanka have the highest rates of inflation in the region.
Inflation rate in Bangladesh is still above 9 per cent. Economist Ahsan Mansur said, "We could not, we cannot. If we can't diagnose the disease properly, or don't want to, we cannot administer the right medicine. India has been successful.
He believes, issuing banknotes should be stopped to avert inflation. But Bangladesh authorities are issuing new taka notes on a large scale .
*This report, originally published in Prothom Alo Print edition in Bangla, has been rewritten in English by Farjana Liakat