Originally posted in The Daily Sun on 17 February 2024
Impact of duty cut yet to be visible
The impact of cutting import duties for four essential commodities that remain in high demand during Ramadan is yet to become visible in the markets due to some unscrupulous traders’ tendency of making excessive profits, said market insiders.
Besides, only duty cuts will not have any impact on commodity prices if the market structure is not competitive, say economists.
The National Board of Revenue (NBR) reduced the import duties on rice, sugar, edible oils and dates on 7 February as per the direction of Prime Minister Sheikh Hasina with a view to bring down essentials’ prices ahead of Ramadan.
The tax exemptions include the withdrawal of a 10% import duty on dates, a 20% regulatory duty on rice, and 5% duties on edible oil and reduction of import duty from Tk1,500 to Tk1,000 per tonne on refined and unrefined sugar.
Over a week has passed since the government lowered the duties, but the measure has hardly had an impact on the market so far.
The price of packaged sugar was Tk144 per kg and soybean oil was Tk173 per litre on Friday which was the same before the duties on them were reduced.
Prices of other essential commodities including chickpeas, dried peas, onions, dates, beef, broiler chicken, egg, mung beans, garlic, ginger and flour have also increased manifold ahead of the holy month of Ramadan.
Dr Jahangir Alam Khan, an agro-economist and researcher, told the Daily Sun that the government has done its best but the devil would not listen to the scriptures.
“The businessmen are creating supply disruption in advance, so, businessmen will try to make excessive profit no matter how much the import duty is reduced,” he said.
“However, the import will increase as duty has been reduced. If imports have been increased then the supply of essentials will increase. A positive impact of duty cuts will be visible when the supply of essentials increases in the market. We have to wait for it,” he said.
Dr Khondaker Golam Moazzem, research director of the Centre for Policy Dialogue (CPD), said, “Our market structure is not competitive. Only a few suppliers are dominating a large consumer market. The supplier can make a large impact on the market structure. For this reason, they also have the ability to make pricing decisions.”
For some products, there are only a few suppliers – in some cases there are only one or two suppliers. So, they do not feel any pressure to reduce the price after the government provides duty exemptions. They increase the price of essentials as they wish on the pretext of any global condition. It happens because there are not enough suppliers in the market, Dr Moazzem told the Daily Sun.
The market would not be stable until the authorities concerned ensure enough number of suppliers in the market, and monitor the market practice of the large suppliers and producers including distributors, dealers, wholesalers and others, he said.
“Only a duty cut would not reduce the price of essentials. The government should change the law structure. It should also fix a limit regarding who can sell how much food products, so that other suppliers can enter the market. It would create competition in the market, and reduce the price of essentials,” said the economist.
Cutting duties would have a little impact on the prices of essentials due devaluation of local currency against the dollar price, said Biswajit Saha, general manager (finance and accounts), of City Group.
“Cutting duties would lower sugar price by Tk0.50 per kg, and might reduce the soybean oil price by Tk4-5 per litre,” he said.
Products with the new price rate will be available soon after the commerce ministry fixes it, he added.
According to the Chattogram Custom House, in the last three and half months (1 October 2023 to 20 January 2024) around 1.18 lakh tonnes of sugar was imported while 80,212 tonnes sugar was imported in the same period of the previous year.
During the same period, around 7.46 lakh tonnes of crude edible oil was imported while in the previous year, the import was around 6.58 lakh tonnes.
Around 49,515 tonnes of chickpeas was imported during that period, while around 24,486 tonnes was imported during the same time of the previous year.
According to market insiders, the demand for edible oil is around 3.5 lakh tonnes and chickpeas are 1 lakh tonnes in Ramadan.