Edible oil, flour, onion retailing much higher than import price: Govt report

A recent government survey has found that retail prices of essential commodities such as edible oil, flour, wheat flour and onion in the markets are much higher than their import prices.

Only lentils and garlic are retailing at prices close to their import prices. Besides, the retail prices of locally produced agricultural goods were found much higher than their production prices, says the survey report, seen by The Business Standard.

Infographic: TBS

Tapan Kanti Ghosh, senior secretary of the Ministry of Commerce, presented the report in the 7th meeting of the Task Force on Review of Commodity Prices and Market Situation in June.

"There is a significant difference in the retail price of imported products compared to the import price. Prices of edible oil and sugar are increasing due to non-compliance with orders to appoint marketing distributors of essential commodities," it said.

The ministry conducted the survey to find out the reasons behind the persisting volatility in the country's commodity market. 

Prices of almost all essential goods have been on the rise for months despite a decrease in global prices. According to allegations, prices are being controlled by syndicates of big unscrupulous traders.

While delivering a speech in Parliament on 26 June, Commerce Minister Tipu Munshi acknowledged the presence of syndicates in the market. 

Stating that efforts are underway to break the syndicates, he said, "It is true that big groups try to make a lot of profit. It is possible to take legal action against these syndicates. But we have to be careful in doing so. We can jail them and fine them but that might suddenly create a crisis in the market which will be difficult for us to bear. That is why we try to control the market through discussions with big traders."

TCB's role insignificant

The Trading Corporation of Bangladesh (TCB) is supplying oil, sugar, pulses and rice to one crore families in the country at subsidised prices.

The commerce ministry report said that TCB's open market sale (OMS) programme plays an important role in social security but its role in stabilising prices of daily commodities is "very insignificant".

Since the TCB procure products from local sources, the OMS programme is not creating any positive impact on the total stock of goods. If more OMS goods were imported, then goods stock would have been better, the report mentioned.

Farmers not getting fair prices

Domestically produced onions can meet 85% of local demand, ginger 65% and garlic 80%. However, farmers are not getting their desired price during the production season due to the wastage of produce. Products are wasted due to a lack of storage facilities and the consumers are suffering during the lean period, says the report.

The government often bans the import of various products, including onions, to ensure fair prices for farmers. But instead of imposing a ban on the import of products, the commerce ministry has recommended the imposition of seasonal tariffs to protect the interests of farmers.

Citing the reason for the unusual increase in the price of onion recently, the ministry said middlemen have taken advantage of the delay in the issuance of import permits by the Ministry of Agriculture. The import was banned to protect the local onion farmers.

Similarly, to protect the local sugar industry, high duty was imposed on sugar imports, but currently, local sugar production is only 1% of the total demand.

The commerce ministry report also cited the dollar shortage as a reason for the increase in the prices of imported goods. Quoting importers, the report said, imports are being disrupted as authorised dealer (AD) banks are unable to ensure the timely supply of dollars. Besides, the cost of import is increasing due to the 100% LC margin. 

Market monitoring

The Directorate of National Consumer Rights Protection managed to create a positive image in terms of market monitoring, but due to a lack of manpower, it is not possible for the agency to monitor markets across the country, the commerce ministry said in the report. 

In-person market monitoring is not a sustainable solution. Commodity market management has structural and policy weaknesses, the ministry said in the report, admitting that there is a lack of healthy competition in the market.

Recommendations

There were several recommendations in the report to stabilise the commodity market.

Another survey was recommended to find out at which stages of the supply chain of essential commodities, the traders are making extra profits. Also, necessary measures should be taken to reduce the cost of transportation of essential commodities.

TCB's commercial activities should be increased to create a positive impact on market management. 

The Competition Commission should investigate policy and structural deficiencies to ensure competition in the market and give necessary advice.

The Bangladesh Bank should take necessary measures to ensure the supply of dollars at government-fixed rates and relax the 100% margin condition in opening LCs for importing essential products.