Govt buys wheat from Russia at inflated price
The government is set to buy 500,000 tonnes of wheat at US$ 430 per tonne. The price is $50 more than the market price
The Bangladesh government is set to buy 500,000 tonnes of wheat from Russia at the G2G (government to government) level, which would cost US$ 50 more per tonne. As per the agreement that was fixed at the government level the price is US$ 430 per tonne though the current market price is $380.
The procurement committee of the cabinet division on Thursday gave an approval to buy from the wheat from Russia which would arrive in several instalments by December. The government will have to spend Tk 2.4 billion more in importing 500,000 tonnes of wheat at the price it has fixed.
The government has taken the initiative to import wheat from Russia as the stock has dwindled. Trade between Bangladesh and Russia was hindered following Russia’s attack on Ukraine on 24 February. Following the Russia-Ukraine agreement in July, the grain import from that region has resumed.
Speaking about the higher import price, food secretary Md. Ismail Hossain told Prothom Alo on Friday, “We decided to import wheat from Russia on 24 August. The price on that day was $430. We are going to sign the agreement on that price.”
He further said, “The government’s stock of wheat has decreased. That’s why this is good news for our food security that Russia will export 500,000 tonnes of wheat amid this global food crisis.”
The food secretary also said that the first shipment of wheat will arrive here within 40 days of signing the agreement. The whole amount will arrive by December this year.
When the government has already finalised the discussion, the private importers have been waiting for the wheat price to decrease a bit more. Wishing not to be named, several officials of four importing companies said the price would decrease more if they wait a few more days.
Generally, the private importers wait for the price to stagnate when it is declining. Besides, they said, they need some more clarifications regarding the process of import from Russia.
One of the top importers told Prothom Alo that the suppliers have been demanding close to $370 for every tonne of wheat from them. This price includes the cost up to reaching at the outer anchor at Chattogram port. As per the government agreement the price is fixed including the cost of reaching the grain at the port. In that case it costs $10 more per tonne.
The importer also said the wheat could be bought at $380 per tonne including cost of bringing it to the port.
Price is $372 according to the govt
Before taking the decision of importing wheat, Russian ambassador to Bangladesh Aleksandr Mantytsky held a meeting with food minister Sadhan Chandra Majumder at the ministry. He showed interest in exporting wheat from Russia. That time the two countries agreed on buying 300,000 tonnes of wheat. Food minister thanked Russia for its interest to export wheat to Bangladesh, saying this would play an important role in developing bilateral relations.
Later, the food ministry held a virtual meeting with the officials of JSC Prodintorg, Russian state company on grain export, on 24 August. The two sides agreed on importing the grain at $430 per tonne.
The matter was tabled at the cabinet committee on procurement for final approval on Thursday. Following the meeting, the media was informed that 500,000 tonnes of wheat will be imported from Russia, which will cost $215 million (Tk 20.42 billion, considering the USD price at Tk 95). The price of each tonne of wheat will be $430 and Tk 40.85 per kg.
The food directorate said the agreement would be signed by this week.
Faruq Hossain, former director general at Central Procurement Technical Unit (CPTU), told Prothom Alo the price the cabinet committee on procurement approves is the final price.
The food ministry prepares a report on grain situation every day. The day the ministry took the decision of importing wheat from Russia (24 August), according to the report of that day, the price of wheat in Russia was $330 and the cost would be $387 per tonne including freight charges up to the port in Bangladesh. According to the report drew up on 31 August, the rate was $372, a plunge by $15.
Regarding the report, food secretary told Prothom Alo that there is a mistake in the report the ministry prepared. The report was not available on the ministry’s website on Sunday.
A few more countries have been importing wheat from Russia. A Reuters report on 23 August said Egypt has imported 240,000 tonnes of Russian wheat through cost and freight (CFR) system. The price was $368 per tonne.
Regarding this the Bangladeshi importers said the freight charge to Bangladesh would be costlier than Egypt. But overall, Egypt has got the wheat at a much lower price, they acknowledged.
According to Bangladesh Trade and Tariff Commission (BTTC), annual demand of wheat in the country is nearly 7 million tonnes. Of the amount, 6 million tonnes are imported. In 2020-21FY, Bangladesh imported 45 per cent of the required amount from Russia and Ukraine, 23 per cent from Canada, 17 per cent from India and the remaining amount is from other countries.
The country became dependent India for wheat due to the Russia-Ukraine war. But India stopped the export in May to sure their food security. Since then the wheat price in the country was soaring at an unbridled rate.
According to Trading Corporation Bangladesh (TCB), price of lose flour is Tk 47-52 per kg, which is 52 per cent higher than this time of the previous year. On the other hand, the price of packed flour is Tk 55-58 per kg, which is 59 per cent higher than the previous year.
The government also has dwindled to 140,000 tonnes which is 37,000 tonnes less than the last year.
‘Rate should be checked’
US-based newspaper Business Insider says wheat price has been declining globally. On 17 May the price was $438 which has come down to $324 on Friday. The price will decrease more, said projections, because the yield in Russia was better this year. Generally, Canadian wheat is costlier as it contains more carbohydrate than that of Russia, Ukraine and India. That’s why Russian, Ukrainian and Indian wheat are cheaper.
The allegation of importing grain at a higher price was brought earlier as well. The government drew flak as former food minister Quamrul Islam imported rotten wheat at a high price.
ASM Shawkat Ali, adviser to a former caretaker government, told Prothom Alo, “The rate should be checked while importing wheat from the global market, especially, because there were allegations of importing rice and wheat from abroad at a higher price.”
“The grain prices have been declining globally since the agreement of Russia and Ukraine. It needs to be investigated why the food ministry has been importing Russian wheat at a higher rate,” he added.
* The report, originally published in the print and online editions of Prothom Alo, has been rewritten in English by Shameem Reza